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Microcap & Penny Stocks : INSP Investors Research
INSP 130.40+11.3%3:59 PM EST
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To: howsmydrivingal who started this subject3/11/2002 12:07:41 PM
From: Puck  Read Replies (1) of 787
 
An article in today's New York Times about Warren Buffet's critique of stock option compensation makes a provocative point about the potential for abuse when a company has declared that it will issue new stock options to its employees in exchange for already issued out-of-the-money options at a time in the future that hasn't yet arrived in order to circumvent tax regulations requiring corporations to report an expense for doing so if the new options are issued within six months of the cancellation of the existing options, as Infospace has said it will do. Here's the text:

"The other strategy used by some companies to reimburse executives is to allow them to cancel their existing options with a promise that they will be issued new ones six months and one day later, at the market price then prevailing.

The time period is chosen to avoid having to report the value of the options as an expense, thus reducing reported corporate profits. That strategy has been criticized because executives — during the period after the old options are canceled but before the new ones are issued — have an incentive to drive down the price of the stock and with it the price on the options they are to be granted."
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