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

To: Don Lloyd who wrote (83052)	8/17/2000 9:25:44 AM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Don, a substantial part of the increase in equity prices has little to do with managements actions and more to do with the dramatic expansion in earnings multiples. If options are supposed to be incentives fot performance how come they reprice the options when the stock tanks? Sounds like economic violence against the shareholders HO HO HO Mike

To: Don Lloyd who wrote (83052)	8/17/2000 10:22:12 PM
From: TimF	Respond to of 132070

Consider the paradox of Andrew Smithers, the London-based grump who complains that the issuance of all these stock options will ultimately hurt shareholders by diluting their ownership stakes. What he misses is that the problem is self-fixing. Management's options will be valuable only if the market is convinced that future earnings will be sufficient to compensate shareholders for dilution and still provide them an acceptable return. Don, there might be some truth in this, but there is two problems I can think of. 1 - The options might reward moves that will help the company in the short run but hurt in the long run. The owner of the options will then sell the shares on the pop up before the price goes down. 2 - If the stock goes down the options are often repriced. Also even without options management will often want the stock to go up (it makes them look good) but options or not nothing will relieve shareholders of having to watch the company and its management. Nothing but blind trust or having someone else manage your money (and then you have to trust the money manger, broker whatever) will "relieve shareholders of the burdensome necessity of having to monitor management to make sure executives aren't pursuing their own interests against those of shareholders". Tim Tim