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

To: Mark Marcellus who wrote (25058)	10/19/2006 10:03:12 PM
From: Carl Worth	Read Replies (3) \| Respond to of 78717

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. this was poorly worded on my part...what i meant was that if a company is executing well, the fact that they pay their employees well, including options compensation to reward them for contributing to the success of the business, is not going to deter people from investing in that company...when a company starts to struggle, people are more likely to pick through the various reported numbers and point fingers at anyone they can, especially at what they consider to be overcompensated management...ironically, at a time when a company's performance falters, the very options someone might complain about may end up expiring worthless, so that compensation that people were worried about, and which the company currently would have to show as an expense, would turn out to be worthless, and cost the company nothing it's fine to say you avoid companies that "abuse" options, but how could this be defined? i might think it's fine to give a key employee a few thousand options to keep him under contract, whereas someone else might see it as overpaying because they would think you can find someone else to do the same job for less money...the only thing that matters in the end is the bottom line results 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. the new regulations don't make companies account for options, they already had to do that in their filings...the new regulations make companies take charges for costs they aren't incurring...it's true that the scrutiny has changed the way some companies do business, but that is more of an example of publicly traded companies catering to what wall street wants to see, than a correction in what was a fully disclosed and reasonable way of doing business again, companies like DELL and YHOO haven't suffered declines in their stock prices because they were too liberal with options...they have suffered because they are losing market share to competitors...frankly, from the numbers released since the new accounting began, i don't see them cutting back much on issuing options, and that isn't surprising, since it's part of the way they can have any hope of remaining successful, i.e. attracting business and technological talent who can help them innovate and improve