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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Richard Gibbons who wrote (46697)	2/12/1999 10:57:00 AM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Richard, I feel like I overdid the options argument. I think options are a good deal for shareholders if, and it is a big if, they are structured correctly and carefully. You have to be very careful what you are incenting top mgt. to do to your co. MSFT's options program has many flaws, all of which have been overcome by the stock price going up. Now, I think they have all but lost the anti-trust case and there will be some punitive action. A breakup is not out of the question, though I expect a couple of year's earnings in fines and restitution to those they raped is more likely. So, I wouldn't want to own MSFT call options at a time when the pc market is in freefall and the co. could be greatly damaged due to its predatory nature. Also, MSFT is likely to be put on some sort of parole where DOJ can bust them if they beat up competitors. That will certainly slow profit growth in the future. And all of this is coming at an all-time high in the stock price. Options programs should incent hard work and loyalty. Many for lower level employees do. For the executive suite, it is a different story. I know it happened that way to me. I was hired as an investment vp at a mutual fund co. My options had a 6 month vesting period, but the 50% the co. kicked into my 401-k had a 4 year vesting period. Then, after a couple of quarters, they elected me a corporate vp. I thought that was a joke until I noticed that the entire waiting period disappeared with one swell foop of a title. I was now one of the boys. A problem with options is how do you keep key employees when the stock turns south. If it is a bear market, no problem. They have nowhere better to go. But if it is co. specific, they jump ship to a firm that has a stock still going up in price. You also have a problem that even the best option programs reach a point of diminishing returns. After several years, you have many cycles of live options. The current batch in the cooker become a small incentive relative to the huge base that is already ripe. I don't know how you get around that except to hope that the employee staying long enough to reach that nice situation is now too lazy to move elsewhere. MB

To: Richard Gibbons who wrote (46697)	2/12/1999 4:26:00 PM
From: Ed Beers	Read Replies (3) \| Respond to of 132070

> Many of my friends (ie. recent computer science graduates) decided to go to MSFT for the 4 or 5 years that it takes for their options to vest, simply based on the belief that their options would be worth half a million or more when they finally vested. MSFT has gotten a lot of smart people to work like dogs for little pay using this strategy. < If some event, like a drop in the stock price, causes them to revise this belief, how do you expect them to behave?