Should We Get Rid Of Stock Options Completely?

from the it's-an-option... dept

The debate has raged on for a while about whether or not companies should be forced to expense stock options grants. A lot of the arguments on both sides make a lot of sense. However, some companies are changing the debate altogether and asking should companies grant stock options at all. My initial reaction to this question was that it was a clear overreaction. As the standard refrain in Silicon Valley goes, stock options incentivize employees and drive growth. However, the article quotes some folks who make very good points, saying that there are much better ways to provide compensation incentives to employees, that better align them with what’s best for the company. Stock options give employees a much more short term incentive: to boost the stock price now. Incentives that focus on having them build a strong, sustainable, growing company could make a lot more sense.

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Comments on “Should We Get Rid Of Stock Options Completely?”

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Unanimous Howard says:

Stock options: Longer period between exercise and

Of all people, it was the shyster Bill Lerach who on a PBS talk show the other day proposed a workable alternative: Make executives wait a year between exercising a stock option and selling their stock.

Lerach is the class action lawyer for Milberg Weiss who makes a great living suing croporations.

He pointed out that until 15 years ago, the SEC regarded sale of an exercised stock option within 6 months of exercise as insider trading.

But the present tax laws give you immediate income tax liability on the difference between the market price and the exercise price.

Change the tax law to move out the liability to the difference between market price AT TIME OF SALE and theexercise price, and you can make sure that those who exercise options can be required to hold for one year, ending the present slash-and-burn incentives for execs.

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