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Non-Tech : Cendant Corporation (NYSE:CD) -- Ignore unavailable to you. Want to Upgrade?

To: ACEINVESTOR who wrote (2608)	11/25/1998 8:28:00 PM
From: Jeff Lins	Read Replies (2) \| Respond to of 3627

THis is a little OT, but what the hey- Options as an incentive don't work. Tons of data over the years that demonstrate just how hard it is to put an incentive package together that actually motivates. Though the studies I have seen don't specifically get into repricing (read: robbery); they mostly look at historic returns and a variety of compensation methods. CD is a pretty good example of why options specifically don't work- for starters, this incredible market has "lifted all boats". Tying compensation to stock price may align "them" with "us", but hell, all you needed to do for the last 4 years is not dissapoint and you would have made- on average- stunning returns. Next, options only look at stock price. Though we think, again, that aligns us with management, the question of time horizons come in. If this is a "fire and forget" stock that I stick in my portfolio for life (G.E.) then I want the company to look at the long term- but manipulations and other "fun stuff" can be done to pump up stock in shorter run, say a few years. In other words, perhaps management has a great opportunity to expand the business, but the man at the helm is WAY too risk averse, and has a huge percent of personal wealth in options. New business could triple his worth or cut it in half...so he decides to not do it and take the "easy" 20% the market has been paying. And at what point does the supposed "incentive" lose its marginal value? Is someone going to do a better job if he is paid $100million instead of $75million? If so, fire his worthless ass. These options deals have gotten WAY out of control...Disney and Comp Assoc. were two examples of STUPID options deals... Lastly, repricing takes the whole concept of aligning management with shareholders and pisses on it, then poops on it (acceptable terminology, I hope), then shoves it down our throats... There are tons of other reasons why incentives in general just don't work. SO...my point is.......don't let anybody fool you. Options don't do shit to align anybody's goals. It is merely a way to pay hurrendous sums of money to those who really don't deserve it. And they can do it without it immediately going through the income statement...until you realize that the dillution, which, hey is only a couple of cents a share...is FOREVER!!! Or, until we buy back the dilution. Silverman's actions were in no way any different than having CD write him a 9 digit check... Our system is truly fouled up. Boards of directors, compensation committees, stock options...at first they all seem democratic in nature...closer examination reveals criminal behavior very much out of the common stockholders hands... Whoa...sorry for the soapbox..I'll stop now :) jefflins