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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (79648)	11/13/1998 10:12:00 AM
From: rudedog	Read Replies (1) \| Respond to of 176387

Lee - why not retain that top talent with a stock grant or stock-indexed bonus which shows up on the balance sheet? The value to the employee is the same but the financial implications are more visible.

To: Lee who wrote (79648)	11/13/1998 12:03:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Lee, I think it is only fair that companies pay salaries in cash, and avoid the habit of picking investors pockets. If they want to pay bonuses for performance it ought to be paid on the basis of standardized accounting, like what the company reports to the IRS, not some fairy tale stuff they concoct for investors. I am not accusing Dell of being a special abuser of the system. Most growth companies do it. The policy began as a result of a need to conserve cash by young growth companies, and to make management accountable to the bottom line. But, as the saying goes, the road to hell is paved with good intentions. The fact is that Dell's financial transactions are so complicated that it is impossible to tell what their SGA cost is. Look at it this way: suppose I work for XYZ company, and instead of paying me a salary they issue me options for 50,000 shares of stock at $1 each. Suppose that there are 10 MM shares outstanding, each selling for $10, so the total market capitalization is $100 MM. Now I turn around and sell my 50,000 shares and pocket a cool $500,000 (for which I paid $50,000) for a net gain to me of $450,000 (which I contend ought to be considered an expense item). Here's the result of all of this. The capitalization of the company should have increased to $100,050,000 as a result of my capital infusion of $50,000 to pay for my stock. But the there are now 10,050,000 shares outstanding, so the price per share ought to be $9.955. Now you see what happened: the company used the shareholders to fund my salary (450,000) and hoped that the resulting inflated earnings would go unnoticed by shareholders. Perhaps if enough investors begin to holler foul at this practice it will end. But if we sit idly by and do nothing there will be no effort on the part of companies to end this practice. TTFN, CTC