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

To: PerryA who wrote (64520)	9/14/2003 4:11:43 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 77400

Perry, Giving people something they want and value as compensation for employment is a business expense, period. Be objective and see it for what it is. You can still favor options as a form of compensation, but don't let abstractions and convoluted rationalizations convince you that it's not really an expense. It's only an expense to the person or persons who actually pay for it. If a company has the salaries of its executives paid by the Federal Government, those salaries would not be an expense to the company and it would be an exceptionally poor idea to record them as expenses and try to deduct them from taxes. It is the shareholders who actually pay stock and option compensation expenses. They can pay it in ownership dilution or they can individually restore their ownership positions by buying shares either on the market or from the executives directly. In either case the expense is the cost of the shares and it is paid exactly once. Regards, Don

To: PerryA who wrote (64520)	9/14/2003 2:31:25 PM
From: Boca_PETE	Read Replies (3) \| Respond to of 77400

PerryA: re:("Granting Stock Options") "Giving people something they want and value as compensation for employment is a business expense, period." True only when that value is COMPANY VALUE. Because the exercise price of granted company stock options must be equal to the company stock market value at date of grant, such options have ZERO VALUE at the date they "are given" to employees. Moreover, by their terms, they are NON TRANSFERABLE (cannot be sold), from the date of grant through the date of exercise. Because of this latter issue, assigning a "value' to them based upon the model used to value options that are freely traded is a farce in my opinion. Instead of value leaving the company in exchange for employee services (ie. compensation), value flows into the company in the form of cash paid to the company in exchange of issuance of shares to the employee (ie. an increase in capital - shareholder's equity). That's it for the company. After that point, cash you call "compensation" flows to the employee directly from company shareholders, not from the company. To record an expense on the company's books for an outlay that is not made by the company and never will be is a distortion - a fiction - a farce. Period. The only company impact is the spreading of earnings and dividends over a greater number of outstanding shares (ie. dilution). This is the cash flow reality the even the FASB cannot deny. Only their prescription (which proves my above thesis) is to report "stock option grant compensation expense" on the income statement, and, back it out on the cash flow statement for the reasons described above. You WERE wrong in believing a malicious intent. I believe people who believe "stock option grant expense" should be booked have already been mislead - by the FASB and their technical staff. Sorry to disagree with you, but during my career I handled accounting and reporting of stock options for many years with two separate companies and know how these benefits work. Certainly to the employee they are "compensation". WHO PAYS THAT COMPENSATION to me IS THE CRUCIAL FACTOR in determining whose books the compensation should be recorded on. Because the company has no part in paying the employee the sales proceeds from selling shares acquired under an option plan, I say the expense for that cash flow to the employee DOES NOT belong on the books of the company. Period. P