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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Carl Worth who wrote (25057)	10/19/2006 9:16:27 PM
From: Mark Marcellus	Read Replies (1) \| Respond to of 78714

finally, notice that no one cares about option grants when companies are running on all cylinders, such as the current situation at GOOG I care, and I avoid companies that abuse options. I do agree that regulating the amount of options wouldn't work. frankly, i remain convinced that the whole options accounting situation is a lot of BS Here I disagree. Forcing companies to account for options does make sense, IMO, and in many cases it has improved behavior. I find it ironic that companies who fought tooth and nail against expensing options, claiming they had no cost, are now cutting back on options because they "don't make economic sense". Once the options grants hit the bottom line, you eliminate the candy store mentality. It may not be rational, but it works, and it works for the benefit of shareholders.

To: Carl Worth who wrote (25057)	10/19/2006 11:58:05 PM
From: TimbaBear	Read Replies (1) \| Respond to of 78714

there's no way that such things could or should be regulated... Then the SEC is doing is what? ....this is akin to the congressional nonsense about windfall taxes on energy companies simply because they had a few great years of profits. No, it is not. I'm not proposing taking away the corporate profits, I'm proposing an accounting change which accurately reflects the expenses of doing business and urging the discovery and implementation of measures to protect the public from insiders pilfering the profits. ...if you choose not to own stock in a particular company because it gives options to its management and/or employees, so be it, but it is irresponsible and impossible to try to determine an "acceptable" level for compensation. So you put yourself on the side of the issue that says it is OK that I, as an owner, get the profits stolen from me by greedy management but not OK for me to want there to be a law against the theft? ...some people here are saying options are okay for someone who takes a risk at starting with a fledgling company,... I'm not one of those people. If stock is to be used to "incent" the brightest, buy it on the open market and use it as you will, expensing it at fair market whenever you do. Eliminate options, they are nothing but a method for abuse. ...it's one thing to say that the backdating of options was deceitful, it clearly was... But, according to your position you don't believe it should be punished because you don't believe it should be regulated in the first place. ...it's quite another thing to say that companies like YHOO or whoever, that issue options as part of their strategy to attract and keep intellectual talent, are somehow deceiving you or anyone else. I never claimed YHOO was being deceitful. I claimed surprise and outrage over the fact that management took such a lion's share of the profits. I do claim that those companies who one the one hand buy stock for treasury stock and on the other issue stock out of treasury stock to meet options maturities are doing so with the intention of being deceitful. That process has only one purpose for being used....so that the expense is not expensed. frankly, i remain convinced that the whole options accounting situation is a lot of BS...when a company such as YHOO issues these options, they don't have to go out and buy them in the open market...you can say they have value, and they do, but the value is due to the potential of the company to perform in the future, not to any current cost I've heard that argument before and it is misguided (at best). Maybe there is or is not a cost when the option is issued. But there is definitely a cost when they are exercised and the company pays that cost when they buy stock to prevent dilution, so the cost is quantifiable. If there was no value to the options, they could not serve the function you suggest they serve best: to attract the best and brightest. Again, if a company wants to issue stock on a vestiture basis, let them buy it on the open market and expense it on the same basis. That they don't has a reason and that reason is that management wants the best of both worlds: outrageous compensation and a company that looks more profitable than it really is. ...all of this aside however, the point in reference to your post here is that no one should regulate how much profit a corporation can make,... I certainly do not advocate regulating how much money a corporation can make as long as they adhere to the rules of a fair and open marketplace. ...or how much of those profits it should be able to share with its management and employees... If it is a publicly traded company then what I am advocating is that the shareholders be protected as well as management. The pendulum has swung too far and management is just taking profits whether they have added value or not. If the insiders want to take all of the profits that's fine, then keep the company private or take it private at a fair market price. ...if you don't like the compensation parameters, don't buy the stock...it's as simple as that... I don't, it is as simple as that. However, we live and operate in a much larger community than just ourselves. When there was no law, the survival of the fittest worked very well. When we moved beyond that, we started giving protection to those of us who weren't necessarily the fittest because of a lot of reasons, most of which benefitted us. If you take the position that you can only keep your money until a man with a gun or a thief in the night decides to take it from you, then you begin to break down that fabric of society. It is no different in the world of business and publicly traded entities: if we allow the person with the gun or the thief in the night to take all of the profits, soon there won't be any investors to object because they will have realized it for a sucker's game and will have gone elsewhere. The system breaks down when theft is endemic. I submit that what is occurring in corporate America is approaching epidemic proportions (if not already there). I'm all for ingenuity and making out well in life based on hard and smart work. But I am not in favor of stealing from the public. I am smart enough to be able to distill the numbers so that I can determine what I view to be a more accurate portrayal of net profitability. So I will make out fine. But the average investor must continue to have faith in the system for it to continue to work as a method of liquidity. I suggest that that faith, once violated, will be generations in returning. Look at how long it took Americans to begin to trust the stock markets again after the Great Depression. I have heard a saying that I often use on my internet "profiles" that I think applies here: "Any damn fool can learn from their own mistakes! But it takes a wise man to learn from the mistakes of others." Do we learn from the mistakes of past generations and stop the fraud and deceit before the public loses all confidence? Or do we continue to not-so-humbly assert that no protection of the public is needed and let the robber barons disguised as CEOs, and CFOs do what they want? Timba