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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (52242)	7/20/2002 1:29:44 AM
From: paul_philp	Read Replies (2) \| Respond to of 54805

John, There were provisions in the McCain bill that, in effective, capped executive compensation. There were also provisions which come very close to punishing failure. The elements of the McCain's propsal regarding accounting of stock options are secondary to the restrictions on when executives can sell their stock. If McCain's bill had passed it would have created a strong incentive for CEO/Chairman founders to leave their companies. Risk taking is a foundation of the American economy and McCain was suggesting removing significant incentives for risk taking. This raises the very real possibility of negative unintended consequences. Management compensation abuse is a feature of every bubble. In the past it has been done through massive dilutions of existing shareholder, dubious convertible bonds, etc... If it wasn't options it would have been something else. Trivial? I wouldn't say so. The rest of your argument relies solely on co-incident facts. Bad things happened AND stock options were not expensed. They happened at the same time but I see no causal relationship. If there was a causal relationship, why did it only just now happen? Stock options have never been expensed. I favour expensing stock options but not for the economic impact but for the clarity of disclosure. Did Tom S. cash in options worth 1/3 of the companies earnings or shares? What were the circumstances of Tom being granted these options? The compensation and ownership structure of CEO/Founders is usually very complex. I agree that Cisco has been a wealth destroying company. It's entire foray into fibre-optics was a strategic disaster that we easily predicted. However, you argument about shareholded equity ignores the value of Cisco's intangible assets. It seems probable that there might be some value remaining in Cisco technology, patents and their R&D processes. Trivial? I wouldn't say so Well, for not the first time, we disagree. Paul