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To: Charles Tutt who wrote (176296)	12/29/2003 3:29:56 PM
From: The Duke of URL©	Read Replies (2) \| Respond to of 186894

"That would seem a bit odd to me." Not if you understand corporate law. The corporation is a separate entity, and individual animal that is different from its shareholders. The shareholder owns part of that separate entity, the corporation. The only question here is, 'how much is the corportion worth?" Let's say that your corpoation has 10 shares. If your corporation made 12 dollars, had no other expenses, and gave your employees each one stock, it would still have and be worth 12 dollars. Your stock, however, would be worth only 10 dollars and not twelve and there stock would be worth 1 dollar each. It does not matter whether they sell their stock or not. If you paid them a dollar apiece instead of stock, your stock would STILL be worth 10 dollars. (12 less the 2 dollars you paid them) Now, what Barrett is saying is that I can get an employee to work harder than a dollar's worth IF he or she feels part of the company, AND since there is tax advantage to the employee of say 30 cents, I can get and additional 30 cents worth of work in addition. Compensation theory wise, the corp is now worth at least 12 plus the 60 cents (2x30) plus the amount by which the employee works harder which I am guessing is ~23.7 cents (which adds 47.4 cents to the corporate worth)

To: Charles Tutt who wrote (176296)	12/29/2003 4:14:08 PM
From: Dave	Read Replies (1) \| Respond to of 186894

Charles: You made a great point regarding stock options when you said what if a company decided to pay it's employees with stock thereby allowing the company to show no expenses. At least in my very humble opinion, the uproar over stock options has been created since stock options have been abused. The upper echelons of management have personally enriched themselves often at their shareholders's expense. This is what is causing the uproar and furor over stock options. For simplicitly sake, let's make some key assumptions. A company trades at it's book value A company had 10 shares outstanding For starter's, the company has 10 shares outstanding and it's trading at "book value" ($10/share) which gives the company a market cap of $100. In their most recent fiscal year, the company earned $20; therefore it's new books value is $120 or market price of $12 per share. (120/10) Let's say that the company decided to issue a stock option to one of its employees. We'll ignore the ramifications of other employees feeling left out <ggg> at $10. By saving $10 (hey this is a "simplistic" example), the company reports Net Income of $30 and its adjusted Shareholder Equity is $130 It's market price would be (130/11) or 11.81 per share. Now assume that the company "re-purchased" this one share of stock at 11.81 thereby giving the company only 10 shares of stock. This would reduce its shareholder equity by 11.81 or to 130-11.81 = 118.19 or 11.81 per share. While the stock price is the same, think of the "economic" cost and loss of shareholder value that stock options create. This effect is only magnified when companies are trading at multiples of book value. Sorry for the long message, but I personally believe that stock options should be used and are a cost of doing business. However, stock options have been abused and therefore stock options should be expensed. Remember, while stock options expensing will affect a company's net income, it will not have any affect on a company's Cash Flow from Operations.