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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs
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To: Exacctnt who wrote (98)6/21/2002 1:09:39 AM
From: hueyoneRead Replies (2) of 786
 
Exacctnt and Biomaven:

Thanks for the explanations. Do you have any links to FAS 128? Are all companies using this Treasury Stock Method when they report diluted earnings? If so, the main issue must be when and where to best account for stock option compensation.

The current system appears broken to me. Option grants have spiraled out of control---with their value expanding twelve fold since 1993 and CEO pay expanding from 100 times the average worker to 500 times the average worker during that same time. Average vesting periods recently dropped from four years to three years. When the stock price goes down, the board just issues new stock options at a lower price. There is no alignment of outside shareholder interest with insider employee interest at all, and very little incentive for managers to manage well for the long term interests of their companies. They seem to make the big dough whether the companies are performing well for the long term or not.

If stock option compensation was charged directly against net income, (instead of being reflected in diluted earnings per share--- if it is), it seems to me that this might have a chance of reversing the unfortunate trend of stock option compensation spiralling wildly upward and out of control and possibly reversing the trend of the ever widening divergence between insider shareholder interests and outside shareholder interests. What do you think?

Best, Huey
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