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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zcole who wrote (38856)	8/12/2002 10:20:38 AM
From: Casaubon	Read Replies (2) \| Respond to of 52237

whenever you have one of the fat cats arguing not to do something you should get a chill up and down your spine letting you know that's exactly what you should do. If the options have no value, then you should be able to get free options over the counter, too. Now, that doesn't happen. So, the options have value. It's called time value. The longer the time the options are valid the greater the value. Require options to be at market prices or higher at time of grant. I agree with this, and it is the most frequent practice wrt options grants. Now, you can see the options have no intrinsic value at the time of grant. However, the 10 year lifespan (common ISO lifespan) gives them time value premium. BlAck-Scholes gives a ballpark number for the value one might use in valuing the options, in the current quarter. Another way to more accurrately value the options would occur at the time of exercise (not coincidentally when the IRS requires one to pay taxes on this income!). Require executives to hold company stock at a fixed ratio to their current cash compensation. don't tell me what to do with my investment portfolio It's my risk, I'll do with it as I choose. Require executives to hold stock bought as a result of exercised options for a period of time. don't tell me what to do with my investment portfolio It's my risk, I'll do with it as I choose. Require executives to limit sales to a fixed percentage of their ownership in any quarter. don't tell me what to do with my investment portfolio It's my risk, I'll do with it as I choose. Do not reprice options for the CEO if the stock price decreases. This statement proves his argument is fallacious and self-motivated. If the options were to get repriced (ie. when the stock falls), then market forces should simply lower the current price of the stock to reflect a higher probability of the options never going too far in the money. His argument was to make stock holders pay for options (not the company) so, people should value the stock less if such a repricing were to occur. Options values are real and various scenarios of their value can be seen in the financial statements of granting companies, where certain percent growth is assumed. These disclosures represent extremely simple, yet significant ways of letting the shareholders understand the value of the options grants. This value is an inducement to make employees more apt to stay put rather than looking for a higher salary with no options elsewhere. This value needs to be relfected in the books.