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

To: RetiredNow who wrote (63797)	5/4/2003 8:13:59 AM
From: RetiredNow	Respond to of 77400

From WSJ: FASB'S OPTIONS At Merrill Lynch's Hardware Heaven investor conference, last week in San Francisco, the presenting firms took the occasion to lambaste accounting proposals to treat employee stock options as an expense. Both the London-based International Accounting Standards Board and the U.S. Financial Accounting Standards Board have backed option expensing. Under FASB, the options would be valued using an approach based on a mathematical model known as Black-Scholes -- originally developed for exchange-traded options. The FASB plan would actually tweak the Black-Scholes method, to account for the fact that employees exercise their options rather early in the seven-to-ten year life of the typical option. Despite industry criticism of FASB's approach to option valuation, an impressive new study by several professors shows that the organization's method is just about as good as the most state-of-the-art valuation techniques. Using a unique database, Portland State University professor John Bizjak and his collaborators studied over 100,000 option exercises at more than 3,000 firms. Bizjak's currently a fellow at the SEC, but he doesn't speak for the Commission. Based on the behavior of those employees, Bizjak developed an exotic model that took into account the volatility of high-tech stocks, and the wealth difference among employees. After all was said and done, the FASB approach estimates a higher cost for high-tech options, than does Bizjak's state-of-the-art approach, but not by much. For a low-volatility firm like Boeing, Bizjak's approach valued 2001 year options at $1.7 million, compared with $1.8 million under FASB's methodology. For Internet darling Amazon, the fancy method figured a 2001 year cost for options of $19.5 million, compared with $20.6 million by FASB reckoning. Big difference.

To: RetiredNow who wrote (63797)	5/4/2003 10:34:40 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 77400

mindmeld, Hi all, I've been complaining about CEO pay for a long time. A little while ago I posted about how I was becoming more socialist as I got older, in part because of my disgust over the huge discrepancy between the executives of a company and the line managers and staff. My feeling was that executives are grossly overpaid in this country. I mean at what point does money no longer become and incentive, especially when you are earning millions a year? Anyway, Buffet seems to think the same thing, which makes me think I'm on the right track: siliconinvestor.com. The real question is whether someone would justified in being more or less likely to invest in Cisco stock if you and WB were to become the sole arbiters of Cisco wage and salary levels, noting the extreme confidence that both of you have in your own expertise in this area. CEO pay has little to do with incentives and much to do with the market for CEOs. Choosing or rejecting a CEO on the basis of compensation alone runs the extreme risk of future business and stock underperformance by orders of magnitude. With the choice of CEO so critical, rejecting the highest ranked CEO candidate simply because his market value is more than 50X the wage of the line worker, for example, is so absurd as to be a violation of fiduciary responsibility itself, no matter how overpaid CEOs in general may actually be. Regards, Don

To: RetiredNow who wrote (63797)	5/4/2003 11:58:19 AM
From: Lizzie Tudor	Read Replies (2) \| Respond to of 77400

funny thing, but I'm starting to get fed up with Warren Buffett, I wonder if this is a widespread pov for tech people (not the CEOs, the workers). Buffett casts his opinion around on these corporate governance issues while offering up examples such as Coke, a company that personifies the stagnant growth we had in the US prior to tech waking up the economy. Coke hasn't generated any sort of significant job growth since what, maybe 40 years ago? I know he is trying to do the right thing, but if he wants to chime in, then at least take on the tough issues. Coke's solution to options valuations only worked because Coke is such a staid, no growth company. I'd like to see Buffett take on an options expensing methodology for Siebel, as if he were the CEO there in the 90s. Siebel created an entire software genre, created thousands of jobs and a ton of new wealth, and made US companies overall more competitive (personally I don't know how salesforces, deals and opportunities were managed prior to CRM software which Siebel pioneered). Siebel is a tough nut to crack lets see Buffett come up with a solution, which actually accounts for the wealth created there.