Originally Posted by
Check Essential
Those two positions seem somewhat inconsistent.
Profit sharing and stock options are both forms of compensation that is "at risk" based on the company's performance.
Why is profit sharing so good but stock options are bad?
They are not inconsistent. They are both "at risk" but one (profit sharing) is based solely on the company's financial performance. The others (stock and options) are based in part on what the market thinks of the company's performance.
While the market is very rational in the long term, it can be very irrational in the short term. That is the problem with stock options. Not only do they have a limited shelf life, thus more subject to the silly short term fluctuations of the market, but you also have to be right not only about the predicted direction of a stock price, but also the magnitude of the direction.