July 30, 2002
From the desk of Mindles H. Dreck:Last Word on Options
Some guy offers the last word on executive stock options.
Posted by Mindles H. Dreck at July 30, 2002 10:31 PM | TrackBack | Technorati inbound linksSee http://www.corante.com/bottomline/20020801.shtml#3967
I don't think we have to worry about the consequences for income statements if you expense stock options--companies will stop using them as a major form of compensation. I think that better forms can be found.
Perhaps. I just concluded a lengthy discussion about this with some analysts. The basic sentiment is indifference - just one more thing to back out for cash flow numbers.
But we are concerned about what I have dubbed "tantalus" options programs to manipulate earnings in much the same fashion as pension earnings. The companies that have elected to expense will be restating the contingent deferred option reserve each period, creating this opportunity for manipulation.
And, as you point out in your corante piece, cash payments made to mimic options will excape the $1million tax deductible salary cap while NOT appearing in the income statement.
If the point is to make P/Es less deceptive for the little guy, don't you prefer my suggestion about bringing back "primary" EPS and a looser definition of "Common Stock Equivalents"?
Thanks for your thoughts.
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