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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (63661)	4/21/2003 1:06:44 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 77400

John, You wrote: If, and this is a really big if, the management is living up to its fiduciary responsibility to maximize shareholder value, the increase in total company value (from a reduced cash salary requirement) will more than offset the increased share count dilution of existing shareholders, and thus provide them with a net benefit. In other words, shareholders give up less ("increased share count dilution") value than the value of the cash employees give up ("from a reduced cash salary"). Which I re-arranged and abbreviated as "IF management is exercising fiduciary duty THEN employees get less value from shareholders than the cash they forego [plus contrapositive]". Your re-arrangement is invalid because you don't understand the entirely subjective nature of economic value. Value only has meaning in the sense that one person can prefer good A to good B at one instant in time, with the evidence that he subjectively rank values good A above good B existing ONLY in the fact of an actual exchange made of good B for good A. This exchange will have been possible ONLY if an exchange counterparty simultaneously subjectively rank values good B above good A. Note that subjective valuations include everything that might influence the decision to make or not make a given exchange. It is a combination of whim, calculation and context, including all types and quantities of goods owned. Fiduciary duty is an attempt to maximize the value to shareholders of what they receive and to minimize the value to shareholders of what they give up. Since management is acting as an agent for shareholders, it is the projected subjective values of shareholders that are involved. Employee valuations of what THEY receive or give up are entirely independent of the projected shareholder valuations except in the sense that the exchange can never take place UNLESS the goods exchanged are valued by the employees in the reverse order from the projected shareholder valuations. Benefits received and perceived by the recipient of a specific good have NO necessary tie to the costs suffered and perceived by the provider. Regards, Don