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

To: RetiredNow who wrote (64523)	9/14/2003 11:59:07 AM
From: Don Lloyd	Read Replies (3) \| Respond to of 77400

mm, ...let's say you are the owner of a Burger King and you need buy some meat to make burgers to sell to keep the business going. When you pay cash for that meat, you record the expense, because cash came out of your bank account. But let's say you don't have enough cash. So let's say you pay your meat suppliers with stock options instead. You decide that this isn't an expense because you paid with dilution of your ownership instead of cash.... If a herd of cattle wander by and offer to slaughter themselves in exchange for stock options, I would be a fool to not give it due consideration. The fundamental point, as always, seems to be missed. Options, or stock, should be granted IF, and only IF, doing so benefits shareholders. If granting 1 share of company stock is sufficient to reduce cash salary requirements by $2M, that is likely to be beneficial to shareholders. OTOH, granting 20M shares in exchange for reducing cash salary requirements by $1 is NOT likely to be beneficial to shareholders. In between these extremes there MAY be a range of exchange ratios that are beneficial and preferred for both shareholders and employees. This will only be true for some companies and some employees at some times. None of this should be construed to say that actual stock or option grants have always, or even possibly ever, been beneficial to shareholders. But this is not a problem for which the solution is to create a phantom expense where none actually exists beyond the possible ownership dilution of shareholders. It is the treatment of arbitrary stock buybacks that is far too lenient. Regards, Don