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If Nascar thinks things are going south now, just wait ("A Wild Ride," August). The Car of Tomorrow and the Spec Motor that will be the engine of tomorrow will leave GM, Ford, and Dodge with no identity at all. What Nascar has created is a clone of IROC racing, and it will drive racing costs through the roof, the opposite result of what it's wishing for. By taking a great sport and making it a boring sport, they are not putting their customers first.
Vince Herndon
Via E-mail
Nascar appears to be alienating many of its longtime supporters by the arbitrary way it conducts its business, particularly on the track, and the perceived way it treats different competitors.
Also contributing to the "softening" of the business is the press coverage, particularly the live broadcasts of each event. You may have a certain driver that you like, but chances are he or she will get zero coverage if they're not one of the chosen few that are followed during the telecast. Zero coverage for the driver/car also means zero coverage for those sponsors.
You'd have to say that's not a very good marketing tool for many, if not the majority, of Nascar's sponsors!
Why invest major advertising dollars for a car/driver/team where the only benefit is to be able to publish your own advertising, at your own cost, knowing the exposure at a race is very limited? Of the 50-plus-or-minus cars that show up on a weekend, only about 10 get nationwide coverage during the telecasts.
Nascar's loyal, longtime fans appear to be leaving, slowly but surely. History shows that it is easier and cheaper to keep what you have than to try and attract a new fan base.
Douglas A. Innes
Via E-mail
Incorrect Tax Perspective
Your article "Lessons in Sitting Pretty" (Your Money, August) suggests that "employees can significantly reduce that tax hit by holding the stock for at least a year after exercising the option; the resulting proceeds are then taxed at the 15 percent long-term capital-gains rate." I have seen this incorrect assertion many times, but seeing it in such a well-respected publication requires comment. One cannot reduce his tax bill by holding the shares.
When one exercises a nonqualified stock option, he is taxed on the spread between the option price and the market value of the shares at the date of exercise. He pays income tax at ordinary rates on this spread whether he sells the shares or holds them. This is considered compensation and is also subject to payroll taxes. Future appreciation is taxed at capital-gain rates (generally 15 percent) if the shares are held for more than one year from date of exercise.
This incorrect tax perspective is frequently offered in conjunction with advice to exercise options at vesting and hold the shares until expiration rather than holding the options until expiration. While this approach will cause a portion of the profits to be taxed as capital gains instead of ordinary income, it requires a cash infusion at the time of exercise. Rather than paying the taxman at vesting, this cash could be invested in shares, which when appreciated, by any amount small or large, will more than cover the difference in taxes.
Robert Knox
Via E-mail
Disappointment in Sarbox
The investing public is sorely disappointed in the Sarbanes-Oxley Act ("Five Years and Accounting," July). It promised jail time of up to 20 years and fines of up to $20 million for executives who sign off on materially false financial statements. In 2005 there were 1,599 restatements of financial statements and in 2006 there were 1,876, all of which were apparently material enough to require the restatement. But the grand total so far of prosecutions by the Justice Department for crimes under Sarbox is exactly zero. No wonder the billion-dollar flimflams keep on coming.
Carl Olson
Chairman
Fund for Stockowners' Rights
Woodland Hills, California
Measuring Nonfinancial Metrics
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