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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (13996)	2/24/2002 9:58:50 PM
From: Bob Rudd	Read Replies (1) \| Respond to of 78665

The issue for investors, as I see it, isn't that employees are compensated with options, but that the compensation isn't accounted for on the income statement. This causes compensation expenses to be understated, earnings to be overstated and comparability suffers. Another business issue, though, is whether option awards are an appropriate motivator. For someone with company-wide responsibilities, it would be. But for lower level business sub-unit and middle managers, compensation targeted directly at the performance of the business unit or area of responsibility would probably give more bank for the buck since they can't significantly impact the total business. It's probably the lack of expense impact that shifts a lot of compensation towards options that do little to motivate unit specific performance.