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Stock options were the main attraction during the bubble days, with the main goal of attracting young professionals with future earnings. As the SEC and other regulatory bodies cracked down on option expensing, stock option compensation plans have fallen into disfavor
This proposal is not an attempt
to derive extra tax benefits out of the different treatment of dividends.
Rather, it's an attempt to make sure that employees are always on the side of improving the company's profits.
So rather than being paid a salary, workers would be paid in sufficient company shares (perhaps a special class of shares) to guarantee equivalent dividend income.
Their compensation would likely have some regulatory floor, though even that may not be necessaary -- if the stocks become worthless the likelehood of them remaining as employees is not that high anyway.
And of course they would stand to gain tremendously from rising share prices.
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Annotation:
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Curious that there's been 5 votes but zero annotations here. |
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Aren't dividends usually around 1-2% of the share price, which means you'd have to issue 50 times the worker's salary in shares just to give him the dividends for one year? I'd go for that, but that would be giving a large amount of ownership to the employee just for signing up. |
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For example, a $20 share that pays a 0.10 quarterly dividend. Per share, that's 0.40 cents per year, and that means the employee gets 100,000 shares just for a modest $40,000 annual salary. That's a two million dollar signing bonus? |
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Do you keep these shares after you retire or must you give them up? |
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Are more shares issued or taken depending on the current dividend of the company, or is "quarterly dividends worth of x shares" written in the contract from day one, and that number of shares only increases if you're promoted? |
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Maybe I don't quite understand how this works. |
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No I think you've hit the problem right on the head. |
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[/butchering of english phrases] |
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