More thoughts on mixing IT analysis and taking stock options as payment for services...
Category Everything Else
As I was trying to get to sleep last night after being up too late, I ended up spending more time thinking about the whole issue of being an IT analyst firm while also running a venture advisement arm of your business that takes stock options as payment. Specifically, the whole Radicati Ventures thing...
The more I contemplate this, the more I believe that there is no way the analysis part of the firm can remain untainted by this...
It's become very common for financial media sites and columnists to disclose when they may have a vested financial interest in a story or an entity in the story. For instance, if CBS Marketwatch reports on something related to another network's financial situation, they usually reveal that CBS is the owner of the Marketwatch site (or something like that). A financial columnist writing about an industry will often reveal that they do or do not hold stock in companies affected by the story. Granted, we have no way of telling if it always occurs (and I doubt it does), but groups committed to high ethical standards take that approach.
Companies that have different divisions that could potentially have conflicting interests will often establish what are called Chinese Walls. These processes are put in place so that there are no shared responsibilities that would allow one side to control or manipulate a market so that the other side can benefit. Again, in the post-Enron corporate world, we all know it didn't happen as often as it should. But again, it's proper business compliance and control.
Now to the IT analyst situation... The head of the company is often quoted and is the authority behind the studies and reports that are issued by the company. And based on their own website, the same head of the company also is personally involved in each of the venture deals. The deals can be conducted on a cash basis, or part of the payment can be in stock options. It's the stock option situation that creates a conflict that I can't reconcile in my own mind.
I wouldn't expect a venture firm to list all their customers. Legitimately that is competitive information. But we also don't know if those same companies and customers are involved in areas (like messaging) where analysis reports are issued that try and influence the market. Unless those stock option holdings are disclosed, it's impossible to know if a message could be influenced by potential financial gain. It'd be like me writing an article for Forbes trashing a company without revealing I had shorted the company's stock. The information I write may be valid, but the readers have the right to know whether bias might exist. Conversely, if I write a glowing story about an industry niche and/or a company in that area, it's important to know if I might financially benefit from that company's success.
The corporate scandals of the post-dot.com era have made me cynical. I worked for Enron. Although I'd like to believe a company is totally open, I also am not surprised when it's found not to be. Having potential financial stakes in companies or IT areas where you do analysis calls into question your bias in opinions backed by your company. Unless those potential biases are revealed as a regular course of action, the IT public has a right to call into question the outcomes of said analysis.
As I was trying to get to sleep last night after being up too late, I ended up spending more time thinking about the whole issue of being an IT analyst firm while also running a venture advisement arm of your business that takes stock options as payment. Specifically, the whole Radicati Ventures thing...
The more I contemplate this, the more I believe that there is no way the analysis part of the firm can remain untainted by this...
It's become very common for financial media sites and columnists to disclose when they may have a vested financial interest in a story or an entity in the story. For instance, if CBS Marketwatch reports on something related to another network's financial situation, they usually reveal that CBS is the owner of the Marketwatch site (or something like that). A financial columnist writing about an industry will often reveal that they do or do not hold stock in companies affected by the story. Granted, we have no way of telling if it always occurs (and I doubt it does), but groups committed to high ethical standards take that approach.
Companies that have different divisions that could potentially have conflicting interests will often establish what are called Chinese Walls. These processes are put in place so that there are no shared responsibilities that would allow one side to control or manipulate a market so that the other side can benefit. Again, in the post-Enron corporate world, we all know it didn't happen as often as it should. But again, it's proper business compliance and control.
Now to the IT analyst situation... The head of the company is often quoted and is the authority behind the studies and reports that are issued by the company. And based on their own website, the same head of the company also is personally involved in each of the venture deals. The deals can be conducted on a cash basis, or part of the payment can be in stock options. It's the stock option situation that creates a conflict that I can't reconcile in my own mind.
I wouldn't expect a venture firm to list all their customers. Legitimately that is competitive information. But we also don't know if those same companies and customers are involved in areas (like messaging) where analysis reports are issued that try and influence the market. Unless those stock option holdings are disclosed, it's impossible to know if a message could be influenced by potential financial gain. It'd be like me writing an article for Forbes trashing a company without revealing I had shorted the company's stock. The information I write may be valid, but the readers have the right to know whether bias might exist. Conversely, if I write a glowing story about an industry niche and/or a company in that area, it's important to know if I might financially benefit from that company's success.
The corporate scandals of the post-dot.com era have made me cynical. I worked for Enron. Although I'd like to believe a company is totally open, I also am not surprised when it's found not to be. Having potential financial stakes in companies or IT areas where you do analysis calls into question your bias in opinions backed by your company. Unless those potential biases are revealed as a regular course of action, the IT public has a right to call into question the outcomes of said analysis.
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Comments
"Sara Radicati has a shitload of her own money invested in MS stock and is constantly receiving additional MS shares. She really can't afford to lose a good part of her investment and therefore this report reflects her interests instead of technical and market realities."
Posted by jmichael At 10:59:42 On 18/02/2005 | - Website - |
Posted by Duffbert At 11:16:58 On 18/02/2005 | - Website - |