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02/02/2016

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Very thoughtful ideas and insights. Stock options will continue to have a role, as will RSUs and other equity grants. The tax treatment of them and much larger potential upside still makes them more attractive at private companies, which is focus of your blog.

Bruce Brumberg, Editor
myStockOptions.com

Hi Bruce,

You are creating a nice transition into the some of the rest of this series. Everything you have said is true. The question is how to work around the obstacles since stock options will likely have a role for the foreseeable future (and likely beyond).

Thanks for commenting. I hope you will provide additional insight to the the other articles in this series as they are published.

Curious as to whether RSUs developed into a favored option for tax reasons, dilution reasons or incentive/retention reasons. Maybe all, I guess, because they seem to be modern forms of what we used to call Long Term Incentive Retention Plans. LTIRPs featuring phantom stock units were
popular at private firms, public companies without outstanding stock available and enterprises concerned about equity dilution.

Hi Jim,

I will be covering RSUs just a bit in this series (series may extend into March).

RSUs have gained ground for a wide variety of reasons, not all of which are still true (but most of which are still believed to be true).

I hope to cover this in more detail in the 3rd installment of this series (Feb 24.

To Jim's question/comment (and not to steal your thunder, Dan)-- RSUs came onto the scene as publicly traded tech companies matured and the market settled down in the early 2000s. Microsoft led the way by moving from all stock options to all RSUs; once it reached a certain age, its stock price just didn't have the same upward trajectory it had as a younger tech company. The change in accounting rules supported that move. Today, RSUs are the prevalent form of LTI for employees below the executive level, where the line of sight to stock-price performance is blurry at best and the tolerance is lower for the risky nature of stock options.

All that said, I agree with Dan and Bruce that stock options still play a key role in executive compensation packages. At that level, both the risk and the upside are meaningful all around, i.e., for the executives as well as for the investor community.

Thanks for the addition Sandra! THis is more great info that leads into future posts on this topic. There is no way there can be too much discussion or information on this.

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