I see such option exercises as a loophole rather than an action the authorities explicitly wanted to allow.
But an option exercise and hold of an in-the-money option basically leaves the employee in pretty much the same risk/benefit position as just holding the unexercised option. (The employee does lose some time-value, but that's a good thing from the shareholder's perspective). So really it's just a tax-planning device and I see no harm to the shareholder at all.
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