Much Ado About Stock Options

from the exactly dept

Back when Microsoft announced their plan to shift from stock options to restricted stock grants, we wrote that it wasn’t a big deal at all. Basically, it was just shifting how the compensation was being doled out, and while it would make a few differences in terms of accounting, those would be quickly accounted for by any analysts, and had no real impact on Microsoft’s business. Bill Gurley has now written up a much longer analysis of why this wasn’t a big deal at all, pointing out that the only thing it might do is encourage more conservative behavior – which is actually more harmful for the overall economy. Giving stock grants instead of options encourages employees to protect value more than grow value. He also points out, correctly, that much of the argument over stock options is an over reaction to (and a misunderstanding of) the corporate scandals of recent years. As he says, sarcastically: “It seems that stock option instruments–as opposed to human greed, malfeasance and corruption–were so dangerously alluring that they encouraged otherwise ethical men and women to commit fraud on our economic system.”

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