The Options Handcuff — Why cash-rich companies like Dell and Microsoft don’t (and won’t) pay dividends.

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To a large degree, the focus on encouraging dividends is treating the right symptom but the wrong cause. The fact that companies use their cash to buy back stock instead of paying dividends has nothing to do with the way dividend payments are taxed. It has everything to do with the ways in which accounting practices have historically encouraged companies to pay their employees in options. Not having to report options as compensation on the balance sheet has made companies look healthier than they are.”