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12/02/2013

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So, just out of curiosity, what did the data show about option exercise?

Agree the "everyone is doing it" statements have been flying for years. I've been guilty of it myself. And liking an option because it fits with what you want to do ---- well that's human nature ---- but doesn't have any place in business. Is there an antidote for this?

Dan, you are highlighting a foible that everyone in this business is guilty of -- and yet we base decisions on "everyone is doing it" all the time. More tellingly, we feel proud when we do!

If we all agreed that just using those words was a "tell" that meant something was off kilter, we'd have a big impact on business results, I bet.

Tony,
Due to the surprising results we are putting together a paper that discusses out findings. Hopefully it will be ready soon after the new year.

Jacque,

It is human nature to support our own decisions. The solution to this is to make sure those decisions are based in factual, rather than anecdotal, evidence as much as possible. That is not always possible, but putting in the effort will almost always garner superior results.

Margaret,

I like you idea. I think everyone in the compensation community should tune their ears for the phrases "everyone else is doing..." and "everyone I talked to says..."

Everyone is a far bigger group that we give credit to.

Dan - Drawing broad 'conclusions' from recent experience is an issue that transcends compensation. Think about the dreaded annual performance appraisal, where the data used to evaluate the employee is typically only a couple of months old.

Maybe it's because we're all . . uh, many of us . . uh, well, at least some of us . . OK,Ok, I have a smattering of Attention Deficit Disorder, brought on by a long history of trying to manage too many things at the same time (I used to jokingly refer to this as 'multiplexing').

Anyway, its a common trap. When I am confronted with the 'everyone' syndrome, many times I attempt to seek clarification by asking who 'everyone' is, or who the 'we' is, or who the 'them' are. I've found it helps bring the issue into sharper focus.

Dan:

I breathlessly await your paper. I have to say that in my own experience (and rest assured, I do understand the difference between "anecdote" and "data")in-the-money options will be exercised the moment they vest.

John,
Thanks for pointing out the what I believe is the biggest flaw in performance appraisals. Without regular checkups and communication the and of year measurement is typically wrong and usually meaningless.

Defining "everyone" is the first step is confronting that fact that it is seldom everyone.

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