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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: rkral who wrote (765)	8/11/2005 2:06:51 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 786

The expensing of stock options and of stock itself, are fundamentally the same question,differing only in details. If one should be expensed, so should the other, and vice versa. In fact, neither should be expensed. The granting of stock or option grants simply means that an appreciation in the market value of the stock is partly shared with employees by the SHAREHOLDERS. If there is no appreciation, then there is nothing to share, and shareholders are at least no worse off because of the grants, and may be better off if the grants have enabled the recruitment and retention of talent for a smaller cash salary outlay. If there is an appreciation, then the question that the shareholders must answer is if the size of the shared portion of the appreciation is justified by the advantages that the grants have given the company in its staffing efforts. But the shareholder is still better off because of the appreciation. In any case, the grants in no way are an expense to the entity that is the company itself, and certainly have no detrimental effect on the basic profitability of the business that the company operates. The pseudo expensing that stock and option expensing involves falsely underestimates the profitability of a business and can even turn real profits into reported losses. Regards, Don