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To: Stu R who wrote (119905)	6/5/2002 3:36:11 PM
From: rkral	Read Replies (2) \| Respond to of 152472

Uncle Sam gets paid [edit: a $20] tax from the employee. The company takes a deduction in the amount of the employee's taxable income even though it is not a cash disbursement [edit: which results in a tax benefit of $20]. Argument A: With the tax benefit allowed, Uncle Sam pays the $20 it gets from the employee to the company. Uncle Sam ends up with $0. Therefore, we have "zero taxation". Argument B: With the tax benefit disallowed, Uncle Sam gets $20 from the employee, and another $20 from the company. Uncle Sam ends up with $40. Therefore, we have "double taxation". Interesting. A shell game with logic. Or "a little logic is a dangerous thing". Which argument is correct? Ron

To: Stu R who wrote (119905)	6/5/2002 4:18:08 PM
From: hueyone	Read Replies (1) \| Respond to of 152472

I think a simple standardized methodology should be developed and see no reason why it cannot be done in the current environment without the help of government. Left to their own devices, executives have proven time and time again that they will inflate earnings results on their earnings reports to investors even as they line their own pockets (and most investors are none the wiser for it, but in the end they up poorer for it). The current system is broken and has developed in nothing more than a massive transfer of wealth from common investors to corporate insiders. The only executive I know of that deals with this problem in a fair and open way (with companies he controls) is Warren Buffet. Nearly all the rest of the execs are merrily laughing all the way to the bank with our money. Having said that, perhaps the S&P solution will catch on. But even the S&P solution, as I have read it, does not explain clearly how stock option compensation expense will be calculated. Regardless, stock option compensation expense calculated in any manner, whether it be Black Scholes, the difference between strike price and market price at time of exercise, or some other method, will be a huge improvement over the shameful scam being perpetrated on us now where the companies report the compensation expense to us as zero. By the way, I believe the original 1993 FASB (Financial Accounting Standards Board) proposal may have recommended that companies use Black Scholes to calculate stock options compensation expense in earnings reports to shareholders. (At least I am certain that the original FASB proposal considered employee stock option compensation to be a corporate expense). As most of us know by now, Silcon Valley execs solicited our Congressional “representatives” at that time (1993-94) to shut the FASB proposal down.. With the proposal shut down, during the last ten years, average CEO compensation has mushroomed from 100 times the average worker’s pay to 500 times the average workers pay. Message 17249383 For the Oracle fiscal year 2001, ending May 31, 2001, Larry Ellison personally (all by himself) managed to walk off with 27% of Oracle’s 2.5 billion in after tax income by exercising 706 million worth of stock options---that went unreported on ORCL’s earnings report to shareholders. For the Siebel fiscal year 2001, ending December 31, 2001, Larry Ellison’s long time nemesis and rival, Tom Siebel, personally (all by himself) managed to walk off with 69% of SEBL’s 255 million after tax income by exercising 175 million worth of stock options---which also went unreported on SEBL’s earnings reports to shareholders. The stock option abuse by these two gentleman (the "gentleman" term used loosely) is all the more galling and disgusting considering they are both founders of their respective companies and would be hard pressed to make any legitimate argument that they need more slices of their companies as incentives to succeed. Best, Huey