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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: LLCoolG who wrote (2095)	9/3/1998 3:28:00 PM
From: Chuzzlewit	Read Replies (4) \| Respond to of 4509

LL, you miss the point. The options are generally granted in lieu of a portion of the salary. That is, tech companies use options as part of the regular compensation packages. These are not simply performance rewards or incentives, but are instead intended to compensate employees just as salaries do. As a result, companies are hurt by falling stock prices as employees begin to feel an economic pinch. This is a bad system even when the market is booming. The result is that the costs of options are not borne by the company directly, but instead are borne by the investors indirectly in the form of dilution. Instead of seeing a line item on the income statement, these costs are hidden in the equity section of the balance sheet. But when the market is falling, management is faced with disgruntled employees. Companies like Seagate and IBM among others have repriced options to compensate employees. This is a no-win situation for the shareholders. Bottom line: the use of options for employee compensation is a bad system. TTFN, CTC