Absolutely agree, the 1.5% inflation (or interest.. whatever it's called) for a large amount of the pool per year can be used to fund projects more substantially.

Let's say you run a business with very promising prospects, except every employee paycheck, every piece of equipment and supplies, every marketing endeavor etc. - literally every possible expense has to be paid with a chunk of your own shares. On top of this, you will never directly receive a profit in the form of revenue, only indirectly through the increased value of your own shares, which ironically, can only be pursued by spending more of them. You are cut off from any natural operating capital that should be part of the business process itself.

This is a very awkward position to be in. You're forced to spend the very thing you deem to have the highest future prospects: your shares, at a time when you know it carries the least value.

Couldn't have said it better myself. If there are really great, worthy ideas that can't be homecooked, don't think they'll mind departing with some of the stash :)