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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: hueyone who wrote (99)	6/21/2002 2:38:34 AM
From: Exacctnt	Read Replies (1) \| Respond to of 786

<<<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. >>> How and when to expense stock option costs may depend upon the ultimate purpose of reform. If the general opinion favors expensing to reign in excessive granting of options then higher expense methods such as using the difference between exercise price vs market when the option is exercised could be used. If the purpose of reform is to provide a useful estimate, then Black Scholes would be useful. Any method used has flaws. Every company is different in how they handle their option programs. One thing has changed however, most companies now have massive grants that are out-of-the-money. Because of this occurrence, in my opinion, the worst excesses of option gains is over. As usual we are attempting to shut the gate after the horses have left. That doesn't mean that in a misguided attempt to compensate employees and themselves for all the under water options that have been granted, that companies grant even higher numbers of options in the future.

To: hueyone who wrote (99)	6/21/2002 11:14:08 AM
From: Biomaven	Read Replies (2) \| Respond to of 786

Huey, Yes, all companies report under FAS 128. Seems to me you are conflating two separate issues: 1. Overall compensation levels, particularly of senior management. 2. The use of stock options in paying this compensation. My personal view is that the compensation for top executives compared with middle/lower management is obscene. But I don't think you can blame stock options for this disparity. If you sharply cut back the use of options, do you somehow believe this will better align outside shareholder interest with insider employee interest? I think not. Options in my view are an essential tool for any small high-risk company. Employees accept lower wages in exchange for options. My view is that this is a win-win - it not only motivates employees but it makes them share the risk and rewards. (Note to the extent they have given up salary in exchange for options they have downside as well as upside). Options can of course be abused - but so can other forms of compensation. Peter