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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: The Phoenix who wrote (47695)	2/1/2001 10:27:05 AM
From: Wyätt Gwyön	Respond to of 77400

Gary, I understand what you are saying about incentives, and I agree that that area is where options should be focused. The problem I see is a matter of degree. That is, the amount of options issued may be equivalent to overpaying on a cash basis. I brought up the secretary example as hyperbole, but I think the worst effects are at the higher ranks. You mentioned the other day about how options are not a big part of the typical worker's pay package. Emphasis on "typical". When you get above middle management I think issuance becomes a lot more profligate. For example, I read a few months ago that MSFT was giving some execs option packages that would be worth into 9 figures over a ten-year period if the stock just appreciated modestly on an annual basis. That is just a blurb I read, so I'm not sure about all the particulars. If you look at the big companies, they don't pay their top execs that much in salary. Maybe a million or two. But then these same guys/gals may effectively make 50 million, 100 million, 200 million, who's counting...thanks to options. That is just disguised wages as far as I am concerned. They set the stock-performance bar very low, so it is hard to call it an incentive. If you get a chance, take a look at a recent book called The End of Shareholder Value. They have a good section on Cisco.

To: The Phoenix who wrote (47695)	2/1/2001 10:32:42 AM
From: GVTucker	Read Replies (2) \| Respond to of 77400

Phoenix, RE: Rather I believe - again - that options are an incentive for employee's to excel and drive the company to execute. The problem here is that Harvard Business School just recently published a study that disputes that notion. From the study: "Results indicate that no aspect of a company's pay-plan design predicts the company's performance. The primary reason for linking executive pay to performance may be to provide 'cover' for huge payouts to senior management." Indeed, IMO it isn't a coincidence that the option packages became much more popular when the new tax law came into effect that provided a huge disincentive to company's to pay their employees in excess of $1mm salary. Instead of the desired effect, which was to lower executive pay more in line with the rest of the world, it just shifted the means of payment.