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To: LLCF who wrote (53152)	1/3/2001 9:56:20 AM
From: Perspective	Respond to of 436258

My opinion on options, from someone who's seen them work: Options are an excellent motivator. I work for a Naz analog semiconductor company, and I promise you, the options focus everyone in the company on performance in a way I've never seen before. However, they're used to a bull market, wherein they saw their hard work yield increased earnings, and the increased earnings yielded a rising share price. Now there are two problems. First, the market has rewarded our employees not only for things they've done, but even for things they haven't yet done. My question has been for a long time: if you reward people for things they are going to do, might they just not do them? What if you gave your dog a snack before he did a trick? Think he'd keep doing your tricks? The second problem is more sinister, and it's a systemic issue that I think could knock our economy out of it's dominant leadership role. Again, the value of options depends on the perception that hard work is rewarded through higher earnings, and resulting higher share price. In a Japan-90s financial wipeout, most companies will not be able to increase earnings, even with successful execution. Further, even successful increases in earnings may be more than cancelled out by the gradual bleed from high valuations to more historical norms. If the perception that options reward justly is destroyed, they will lose their utility. Finally, the "golden handcuffs" won't work unless they're made of gold, so employee stability would suffer under this scenario. BC