Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (165389)	5/24/2002 7:51:02 AM
From: GVTucker	Read Replies (1) \| Respond to of 186894

The main reason the government changes tax policy is to increase revenue. From the government's perspective, the cash paid in taxes in either case that we're discussing (paid at time of option grant or paid at the time of exercise) is equal over the long term. Taxes paid upon exercise will be greater than the option's worth when the option is granted, but this is offset by zero taxes paid when an option expires worthless. Cash bonus does not incentivize employees to care about the company's overall financial performance, nor their neighboring depts. An options incentive program gives executives in other depts the motivation to stick their necks out to initiate an alert for a fix to their neighboring dept's problem. A cash-only incentive program would make it someone else's problem, not theirs. An option program makes it everyone's problem. So why is it so necessary that cash incentives cannot solve the problem that you describe? I respectfully disagree with your statement that cash bonuses do not provide for sufficient motivation. Especially when you talk about larger public companies, I would maintain that cash bonus tied to performance is a much better motivator than option grants. An employee can do absolutely nothing about the market price of a stock. The market takes care of that. I would wager that there are a very large number of Intel employees that have attained difficult goals over the past couple of years. If they were compensated by options and not cash, they got nothing for that outperformance. That can be rather disheartening. I would never invest in a company that is a heavy user of cash bonuses over options. It's almost a given that those companies start having huge problems. There are several notorious examples that come to mind, and you don't have to look too far to find these companies. You also don't have to look too far to find companies that have had huge problems tied to the heavy use of options, too. In fact, I would argue that the problems with excessive option grants are worse than the problems with excessive cash grants. There is nothing inherently wrong with either method of motivating employees. And I still can't see why one should be favored over the other.