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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (76342)	2/21/2000 3:54:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Don, It would require a great deal of thought on my part to address every point in your example. However, I can point out a few things that I am sure would effect Warren's thought process. 1. There would be differences on the impact to the valuation of the business as a whole and on a per share basis depending on the circumstances. 2. There would be differences in the valuation of both the business as a whole and on a per share basis if the options were part of a one time payout as opposed to an ongoing cost to existing shareholders in the future. Essentially, a one shot expansion of the number of shares that either includes proceeds or doesn't would likely result in an adjustment to either the valuation of the business as whole, the per share value or both on a one time basis. If the expansion of shares is considered part of an ongoing process that is needed in order to retain employees it would effect his view of the valuation for both the business and the per share value because he would view the constant dilution as a cost to him. In the General Re case, I am sure if he had a price tag of let's say 20 times earning in mind, he did not use GAAP earnings. He lowered GAAP earnings by about 50 million per year. That was the estimate of what it would cost for the substitution of cash. I hope I am clear. Wayne

To: Don Lloyd who wrote (76342)	2/21/2000 4:34:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

Don - You're probably tired of hearing from me (I would be), so I'll keep it short. An unhedged ESOP is a liability. WB would have analyzed the cost of retiring the ESOP and replacing it with a cash bonus plan, which is his pattern. When WB hears his target's plan has been retired, he'd change his valuation by the difference between $100 million and the previously calculated cost of retiring the plan. When he hears about the 10% salary boost, he'd adjust based on the difference between the expense of the cash bonus plan he'd modelled and the 10% raise. -mb