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To: Michael G. Potter who wrote (10532)	2/5/1999 5:39:00 PM
From: Sun Tzu	Respond to of 16960

I see your point, and believe me, as a shareholder who also lost a lot of money, I sympathize. I also completely agree with you that options are not free and should be part of the P&L. Would you prefer it if they were to issue bonds or pay cash to their staff? My different perspective is perhaps due to working on Wall St., where despite high salaries, the bonuses are a very big part of the compensation. There are two points to keep in mind: The salary, like everything else, is subject to supply and demand and is not in absolute terms. Often when there is an option plan involved, you are hired with the implicit understanding that while your salary may be $X, your bonus will be at least $y and perhaps as much $Z. But the stock price is not entirely upto the management. If you intend to prevent your staff from leaving the company, then you have to pay them the market price which includes easy options. I suggest that you look at what happens to stock prices of the companies where their CFO or Chief Engineer quits. The other point is that suppose we enter a prolonged period of small cap under performance or down right bear market. Again if you are happy with your staff and they are doing a good job, then they should be rewarded if that is what you promised them and the market bears it. As an example, I had a girlfriend who is in derivatives. She started with a starting (since she is Jr.) salary of $120k and a bonus of up to 260k, with the implicit understanding that if the bonus was under 50k, she would leave (in fact it would be a polite way of asking her to resign!). This year her institution did poorly (given all the termoil) and her bonus and options were under 30k (remember, she is Jr.). Even though that was near the top of the range for her calleques, she is looking for a better job. So are a good chunk of her calleques. And since I doubt that this internal termoil will do the company any good, I think I will short them at an opportune time. I hope this helps. ST