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To: paul_philp who wrote (52246)	7/20/2002 4:51:41 AM
From: TimbaBear	Respond to of 54805

"...I think people will trust again when they are making money again...." Cynical, but perhaps correct, perhaps not. People didn't give two hoots for conservative accouting when they were making money. Cynical again. Generalizations like this are usually difficult to support don't you think? I know a lot of folks (myself included) for which conservative accounting has always been important. My decisions in the employment of my capital may not always be based solely on the results of accounting analysis, but I've never cared much for fraud. Changing the accounting for stock options will not have anything but a trivial overall impact on the economy. I disagree. There are several sources of impact that I can think of here. One is the quantitative impact, which may or may not be trivial depending on the true level at which the ownership of publicly traded corporations has been given away. The other, to which I allude, is the qualitative impact. Trust and confidence has been deeply injured and it will take effective action to cure the discovered areas of abuse, and the passage of time to help heal the wounds. But the perception that the process of correction has truly started may have more impact on market psychology than the quantitative significance of which item was addressed first. I agree that what we are now experiencing is what appears to be the typical post-bubble discoveries. The change in legislation afterwards has resulted in both good and not so good consequences. To indicate that the current experience is typical and therefore (by implication) nothing should be done to correct the system is just as foolhardy as would be the enactment of ill-conceived legislation. Accounting for stock options won't "cure" the market, but a well thought-out proposal, quickly implemented, may help begin the process of rebuilding severely damaged trust and confidence. Any one item is just a piece of the mosaic. To imply that, as such, it is insignificant and curing its deficiencies unimportant fails to take in the whole picture.

To: paul_philp who wrote (52246)	7/23/2002 1:52:54 PM
From: EnricoPalazzo	Read Replies (2) \| Respond to of 54805

I certainly don't think it will 'fix' the market or 'kill' the technology industry. The first question to ask is, do we think that accounting for stock options will substantially reduce their use? If the answer is no, I don't know why we'd want to bother with reform (I can think of lots of silly psychological reasons, but no good ones). So let's assume that it would substantially reduce their use. The fact is that stock options are right now widespread in the tech industry. It is the only way for tech companies to compensate their employees highly without interfering with their ability to stay in business (i.e. without reducing their short-term cash flow). Some (not all) high-tech employees are intelligent, passionate and hardworking, and those sorts of employees generally demand high compensation. It's not like a law firm where you can just stick it to clients in order to pay your employees--high-tech firms often need stock options if they are going to pay their employees the going rate. Money is definitely not the only reason I came to work at Microsoft, but if the choice hadn't been (good salary + great stock options) vs. (great salary) but instead was (good salary) vs. (great salary), it would have been harder to justify working in high-tech instead of some higher-paying field. Secondly, I do think that stock options encourage employees to think of the long term. At Microsoft, which is granted a unique and unusually successful case, employees generally think and speak in terms of what's good for the company, rather than what's good for me or good for my particular foxhole. I think that stock options have a lot to do with that. So no, I wouldn't say that stock option reform will kill the high-tech industry. However, I do think that stock options are a particularly good form of compensation for the high-tech industry. Stock options can be abused, as can any form of compensation. Greedy execs will always find a way to rob from their shareholders. Ethan