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Originally Posted by FTPdelaysuck
So many things are factually incorrect here. The S&P has trounced gold since 1957 (you did not factor in reinvested dividends).
I don't want to generalize about stock options in the tech sector, but stock options are not a reason to avoid the tech sector in general. Sure there are plenty of companies that dilute their shareholders too much and many execs have options that are too generous. Companies in all sectors will use options to attract the best and brightest talent. The largest impact for these companies (re: executives ) is generally not the compensation -- but performance. I'd much much rather be invested in a company where the CEO does a great job and is grossly overpaid rather than a company with a crappy ceo that works for free. The real risk investing in the tech sector over the longer term is that visibility is so limited.
"Dr. Siegel also conducted an exhaustive study of stock market returns from 1871 through 2003. He showed that this simple approach to investing produced “97% of the total after-inflation accumulation from stocks… while only 3% comes from capital gains.”"
Stock options don't consider dividends they only consider capital gains. The typical bull**** employee stock option is 10 years at the current price. Thus over 10 year all the gains are generally inflation. The government gets their 45% corporate tax, the CEOs and employees get theirs the inflation, and the investors gets to pay the capital gains tax on the inflation. The stock market has not beat inflation since 2000. The NASDAQ 100 was about 4000 January 1st, 2000, it is 2940 today. In the mean time inflation has probably doubled. Gasoline was $1.75 a gallon in California today it is $4.00. The average dividend during that time was 1%. High option stocks don't like to pay dividends to boost their capital gains. The U.S. is still the best stock market in the world, due the history before the employee stock option existed.
It is very simple, the large shareholders have the power to hire the CEO for best interests of the shareholders. You don't need stock options. Here is a lecture by Carl Icahn on corporate culture. "The best and brightest don't get to get at the top of the ladder". "The CEO makes 400x the average workers pay and he is simply not worth it."
https://www.youtube.com/watch?v=HlfgQ4_7EYA
The CEO position is worth about $500,000 maybe less. That is to run the conference calls, to write the annual reports and quarterly reports, run the meetings, fire employees, and make the decisions. Many pink sheet stocks CEOs have the same duties for far less.
Now you want CEOS with skin in the game, to get those guys out of retirement. If they don't seem good to the large investors or activist investors you get rid of them.
You don't want to get a CEO with massive stock options as their only goal is to keep it afloat with no dividends to cash in on the inflation. However, if all they got is shares they they either paid for or got at a discount, they will have to improve the fundamentals of the stock to beat inflation, they also get the dividends. you can also have phantom stock where the CEO gets only the dividends of an imaginary amount of shares.
Last edited by steelhouse; 07-01-2013 at 01:40 PM.