No. of Recommendations: 5
The only motivation for this wheeze at a big profitable firm is to screw and fool shareholders by treating compensation as a shell game, taking the real (and gigantic, in the case of stock comp) economic cost of the comp substantially off the books and flattering short term results. Period. It's common and accepted and legal, but it's odious. The agency problem writ large.
I don't think it is the "only" motivation though this is a big part of it. The other motivation is competition for talent. There was a time, especially in hotbed areas of tech (SF, etc), where the talent wouldn't even consider an offer without options. I mean, even if company A offered $350,000/yr and company B offered $200,000/yr + options, talented dynamic people looking for a new challenge would gravitate to company B, and less talented less dynamic looking-for-a-sure-thing people would gravitate to company A. And very likely the talented dynamic people would turn company B into a much bigger success than the folks at company A. That's just the nature of human beings.
