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Technology Stocks : Long Term Investors' Outpost -- Ignore unavailable to you. Want to Upgrade?

To: alanrs who wrote (434)	8/20/2002 9:52:03 PM
From: kumar	Respond to of 562

<If I don't like the rules I don't have to play.> exactly.

To: alanrs who wrote (434)	8/21/2002 8:46:05 AM
From: hueyone	Read Replies (1) \| Respond to of 562

When the posts start running four to one in favor of not expensing stock options, I figure it is OK to come back to post a counter view.<gg> One of the things that bothers me most about all this options bs is that the options policy of all these companies has been public knowledge forever. Alanrs, there has been a tremendous growth in the use of options in the last decade. According to research from Sanford Bernstein, the value of options has grown 12 fold just since 1993. CEO pay, including options, has climbed from 40 times the average workers pay in 1980 to over 500 times today. Companies have discovered it is a great way to inflate earnings and transfer capital from shareholders to insiders without the shareholders realizing it, and the situation has become more and more abusive until now it has reached crises conditions. This trend is clearly not in outside shareholders favor. When I went on the SEBL thread two or three months ago to discuss the pro forma earnings giving effect to FAS 123 in the SEBL 10K, there was not one single poster, I repeat, not one single poster, including myself, who understood at that time how those pro forma numbers in the 10k were derived and what they really represented. That is why Rkal started his employee stock option thread---to discuss the meaning of these numbers and how best to account for stock options expense---if at all. So to say that the options policy of many of these companies has been known and understood by common investors forever just isn't true. Hiding the expenses in the footnotes of the 10ks hasn’t made for good transparency and there has been a literal explosion of options use in the tech community in the last ten years. Complaining about the rules of the game is juvenile. If I don't like the rules I don't have to play. As Timabear noted, this failure to expense for stock options is part of bigger issues than just whether I want to buy Sebl stock or not. In my opinion, the failure to expense stock options on the income statement was a key ingredient in the single largest misallocation of capital in American history, and it was a key ingredient in the bubble and subsequent deflation of the bubble. Billions of dollars went to companies who had no clue how to run a profitable enterprise and billions of dollars went to companies who had no idea how to run a business that produces more from operations than it truly costs to run those operations. Greenspan and many other economists find this fact particularly troubling, and for this reason, Greenspan wants stock options expensed. He is convinced that expensing stock options will lead to more sensible allocation of capital in the American economy and keep America stronger in the long run. I agree with him. Look at the American economy as one big business and ask yourself, do we want capital flowing to productive enterprises (or enterprises that have realistic chances of becoming productive enterprise), or do we want capital flowing to poorly managed enterprises with make believe profitability. On a micro level, I would like to have realistic opportunities to invest in technology companies without the fear of getting the living daylights diluted out of my investments, without having to take the risk that the substitution currency of options will no longer be accepted by employees (and that substituting cash compensation will reveal the companies’ true profitability) and without having to take the risk that management will cavalierly grant replacement options every time the stock goes down. The untenable notion that stock options are “free”, skews management towards shortsighted thinking, is bad for companies’ long term stock price performance, bad for shareholders and is bad for America. Best, Huey