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To: GST who wrote (160023)	4/4/2004 7:52:09 AM
From: Don Lloyd	Respond to of 164684

GST, You can pay people with lottery tickets that otherwise could be purchased at a local convenience store. If the convenience store sells a ticket for $10 then the value of each ticket for compensation purposes could also be set at $10 per ticket. It would make no difference from an expensing point of view whether or not anybody who was paid in lottery tickets ever won. The compensation impact is not from the winning, it is from the opportunity cost of giving away lottery tickets that could otherwise be sold. Your analogy is good, but it doesn't go far enough. When a company grants stock (or options), it doesn't need to pay $10, but can just print up new certificates without significant cost or limit. Because of this the opportunity cost is effectively zero. If it makes sense to sell stock, grant stock or both, one doesn't interfere with the other. If Intel gives its employees Microsoft stock, THAT is an expense because the company has given up something that is a real economic asset to itself. OTOH, when it gives up Intel stock, it is not giving up an economic asset to itself, but simply diluting shareholders. In either case the employees realize the exact same immediate benefit (ignoring tax treatment), and the shareholders are impacted to the same degree, but in different forms. Regards, Don