Subject: Re: Make Berkshire Compound Again!
Mungofitch, referring to paying Google engineers with stock instead of cash:
It is a method of compensation almost certainly chosen precisely because the true long run cost is very well concealed, despite being so much higher.

First, some things I have learned about Google as I looked into this:
1) In the 21 years it has been public, the market cap of the company has grown by 27% APR or 150X from $0.03T to $4.30T
2) Its "trend" P/E ratio has risen from less than 17 to about 19 during that time (based on fitted exponentials to its Earnings and Market Cap growth to smooth them)
3) Share dilution due to SBC (Stock Based Compensation) has been 26%: of all shares ever issued, 26% of them were as a result of paying employees in shares instead of cash.
5) The average price of a share used to pay an employee over all shares so used has been $50/share, much less than the stock's ~$350 per share current price.

Essentially, Mungofitch's complaint about this is that paying early employees with shares that, at the time you publicly awarded those shares to those employees, were trading for MUCH LESS than their current $350 or so price can "almost certainly" be explained because the high cost of that practice to future shareholders was very well concealed, and these employees could have been paid from cash on hand instead.

Of course, back in 2004, say, when Google went public, every share of google bought or sold on the exchange went for around $2.50, its split adjusted price. Everybody who decided to invest in Google had merely to give Google $2.50 for each split-adjusted share they bought, despite the fact that only 21 years later that share would be worth 140 times as much. Was this engaged in because it was easy for Google to hide the true long term cost to other shareholders of letting people buy shares for $2.50 cash (split adjusted)? If using each split-adjusted share to raise $2.50 cash was kosher, why is using each split-adjusted share to pay $2.50 of salary "almost certainly" concealment?

Do investors have some grand moral claim for MORE THAN 140X returns on their $2.50 investments? Is it immoral to offer the same deal to employees by paying them in shares at the exact same dollar conversion that they were being exchanged for cash in public at the time?

Some of what Mungofitch says suggests that by using shares instead of $2.50 cash, Google was getting some erroneous accounting treatment that was SO erroneous that it amounted to a fraud being perpetrated upon existing shareholders (I hope I am not overstating Mungofitch's distaste for this practice).

In fact, every share used to pay an employee was accounted for identically to a new share issued to raise cash in a public offering. And the precise numbers of shares and the values of salary they were used to pay were dutifully recorded in 10-Q's, 10-K's, and published reports.

Further, every cent of tax including social security and medicare withholding that would have been taken by the US Government had the salary been paid in cash was taken, in cash, from Google when Google paid shares out to its employees in compensation.

I can only guess that Mungofitch concern is that the shares delivered to the employee were valued at the time they were promised to the employee, even though they generally did not get given to the employee until a year or two later at that value. But there was nothing secretive about this. But certainly if I promise to pay you $2000 a month on my mortgage for the next 30 years in 2025, but by 2045 each $1 is worth only 1/2 what it was worth when I made the promise in 2025, I still, with no scandal, pay you $2000 a month in 2045. We have a long history of making promises in nominal terms but at future dates, and sticking to them, without it being considered deceptive.

So what is it about raising $2.50 cash for a share whose future value is $350 that is totally OK, while using that same share at that same time to pay $2.50 in salary is "almost certainly" for the purposes of deception?

Still wondering.