options, page-11

G'day Roboshan,

I'm not going to get all worked up about the issue of options. I'm certainly not going to fire missives off to the company about it.

I do understand how options work. I do understand the conventional rationalization for their use and I do understand that they are frequently used and will probably continue to be.

I am, however, firmly philosophically opposed to their use.

The conventional rationalization for the use of employee options is exactly as you say:

"Employee share plans can be part of a overall salary package in lieu of extra cash so can be used to reward good performance, retain good staff, develop loyalty/ownership and provide incentive."

On the surface that doesn't seem at all unreasonable. It's only when you start to break it down that I believe that argument falls apart.

"provide incentive". The obvious implication here is that by tieing the employees future to the success of the company the employee will work harder and be more loyal to the company. Is that saying that if we did not pay them these options then they would not work to the best of their abilities and would not be loyal?

"in lieu of extra cash". Why would we want to do this? I say pay them what they are worth - IN CASH. We have the cash. Appropriate wages are a legitimate cost of doing business. If we do not have a business that can support the necessary wages structure then we do not have a viable business.

There are other issues that arise. Including the concern that employees focus can become more upon the Share Price than upon the sensible development of the company.

Owners are owners and employees are employees. That does not mean that somebody cannot be both but it should managed be as entirely discreet transactions and not confused by generating an artificial relationship between employment and ownership.

As I said in my previous post - to the risk takers should go the rewards. I welcome any employees to join me in taking the risk and reaping the rewards - it is easy to do - just spend part of the justifiable wages that I am more than willing to pay them on purchasing shares on the ASX. If they buy those shares on market we suffer no ownership dilution.

One final point. Paying employees with options is not cost free - far from it. The Accounting Standards require that an expense be counted on the P&L for the issue of those options. Whilst it does not have a negative impact on CashFlow, it certainly does have a negative impact on Profits.