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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (5634)	2/18/2002 9:05:58 AM
From: Jorj X Mckie	Respond to of 33421

and here is why shareholders won't sweep the stock options thingie under the rug.......Dilution.

To: Jorj X Mckie who wrote (5634)	2/18/2002 9:10:00 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

I have always been a believer in not taxing businesses. Many conservatives/libertarians think along the same lines. But now with the everyone seeing an "enron" in every balance sheet, the tax benefits from the exercising of stock options is being viewed with the ugly eye. Good point. Because I also hold the sentiment that taxes on corporations are merely passed on in higher prices to the consumer. The question, imo, is that companies are claiming a tax deduction on issuing options, without classifying them as wages. So assuming a corporation paid no taxes, there would be no deductions to claim, nor any taxes to be paid. But they still would face the issue of how to account properly for those stock options. So what happens if we take this little tax benefit away from the Cisco's of the world? Same thing as if Cisco has its taxes raised. Simple, they will raise their prices commensurate to their margin targets. The taxes will be passed along to the consumer no matter what. But what CSCO is doing right now is passing those costs on to shareholders, many of whom are VERY LARGE pension plans with TAXPAYERS relying upon the quality of that pension plan for their retirement. And I believe that's what Bill Parrish is most voiciferous about, that many pension plans are blindly being invested in these pyramid schemes (as he calls them), with values inflated by stock option plan. It's a muddied issue, but I'm dealing primarily with the seeming illogic of gross abuse of stock options. After all, why pay employees any cash salaries at all? Just pay them in cheap stock, right? Hawk