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To: Lizzie Tudor who wrote (62869)	2/4/2003 2:04:07 PM
From: Carol M. Morse	Read Replies (1) \| Respond to of 77400

I'm not sure that congress is capable but here are the latest attempts to legislate this (from citizenworks.org): Stock Options Bill Summaries S. 1940 \| H.R. 4075 \| H.R. 5147 \| S. 2760 \| H.R. 5242 \| S. 2822 \| S. 2877 Feb. 13, 2002: Sens. Carl Levin (D-MI) and John McCain (R-AZ) introduces S. 1940, Ending the Double Standard for Stock Options Act. "To amend the Internal Revenue Code of 1986 to provide that corporate tax benefits from stock option compensation expenses are allowed only to the extent such expenses are included in a corporation's financial statements." Requires companies treat stock options on their tax returns the same way they treat them on their financial statements. Thus, in order to receive a tax deduction for stock options, a company would have to report stock options as an expense on its financial statement. March 20, 2002: Rep. Pete Stark (D-CA) introduces H.R. 4075, Ending the Double Standard for Stock Options Act. "To amend the Internal Revenue Code of 1986 to provide that corporate tax benefits from stock option compensation expenses are allowed only to the extent such expenses are included in a corporation's financial statements." Requires companies treat stock options on their tax returns the same way they treat them on their financial statements. Thus, in order to receive a tax deduction for stock options, a company would have to report stock options as an expense on its financial statement. July 17, 2002: Rep. Mary Bono (R-CA) introduces H. R. 5147 Stock Option Accounting Reform Act "To allow the Financial Accounting Standards Board to develop standards of financial accounting and reporting related to the treatment of stock options." Calls on the The Financial Accounting Standards Board to develop standards for valuing and reporting stock options. July 19, 2002: Sen. Mike Enzi (R-WY), introduces S. 2760 , Stock Option Fairness and Accountability Act. "To direct the Securities and Exchange Commission to conduct a study and make recommendations regarding the accounting treatment of stock options for purposes of the Federal securities laws." Gives the Securities and Exchange Commission 180 days to analyze and make regulatory and legislative recommendations on the accounting treatment of stock options. July 26, 2002: Rep. Amory Houghton (R-NY) introduces H. R. 5242 "Workplace Employee Stock Option Act of 2002" "To amend the Internal Revenue Code of 1986 to encourage the granting of employee stock options." Offers added tax breaks for stock options. July 30, 2002: Sen. Ron Wyden (D-OR) introduces S. 2822 "Prevention of Stock Option Abuse Act"; "To prevent publicly traded corporations from issuing stock options to top management in a manner that is detrimental to the long-term interests of shareholders." Calls on the SEC to issue rules within 180 days that would: Require shareholder approval of stock option plans. Require that any stock options issued by a publicly traded corporation to any of its directors or executive officers have a vesting period of not less than 5 years. Prohibit any executives who acquire company stock from selling: - Any stock until 180 days after the date of acquisition; More than 25 percent of such stock until 3 years after the date of acquisition; and More than 75 percent of such stock until 180 days after such person ceases to serve as a director or executive officer of such corporation. Require every publicly traded corporation to include, in each regular quarterly filing to the Securities and Exchange Commission, a separately headed section or subsection the details what stock options have been issued and who owns them. August 1, 2002: Joe Lieberman (D-CT) introduces S. 2877, Rank and File Stock Option Act of 2002. "To amend the Internal Revenue Code of 1986 to ensure that stock options of public companies are granted to rank and file employees as well as officers and directors, and for other purposes." Requires half of the company's stock options to go to employees earning $90,000 or less in order for companies to get a tax deduction on options. Directs the Securities and Exchange Commission (SEC) to do two things: Finalize rules requiring majority shareholder approval on every stock option or stock purchase plan; and Make recommendations on "the need for new rules requiring top executives to hold their stocks for a set period of time and forbidding executives from selling their shares while still employed by the company."

To: Lizzie Tudor who wrote (62869)	2/5/2003 1:50:44 AM
From: hueyone	Read Replies (2) \| Respond to of 77400

re: Black Scholes Folly? All they have to do is come up with an expensing proposal that works for the Siebel situation, and these opposing groups would be forced to support it. Funny you should ask. You remember Siebel's offer to repurchase stock options from employees in the third quarter? The offer was to purchase 31.95 million out of the money stock options with exercise prices over $40 at $1.85 per option. This $1.85 per stock option cash value would then be credited towards a purchase of Seibel stock (with holding restrictions) at the closing price on September 30, 2002. In the 3rd quarter 10Q, the company noted that $1.85 per option buyback price was at least the fair value of the most valuable out of the money stock options included in the eligible 31.95 million stock option pool, so all the employees were getting an offer of fair value or more for their stock options included in the pool. Well, apparently some of the employees didn't think this fair value offer was high enough, because 12% of the eligible stock options were never turned in to swap for the cash/stock deal. Now comes the kicker. What method do you think the company and employees used to determine the fair value of all those underwater stock options they were offering to buy and sell in the 3rd quarter? Yep, that's right, your favorite---Black Scholes. And some employees didn't think this Black Scholes fair value of $1.85 per option , which was set at fair value for the highest, valued stock option in the pool, was high enough! So there you have it Lizzie; we have the solution for valuing stock options in the Siebel situation---it’s called Black Scholes. Siebel management and employees have already been using it to determine fair value for the out of the money employee stock options. Now I am still waiting patiently for you to explain to Rkal how anyone can "easily see that Black-Scholes is flawed". And judging by the actions of Siebel management and employees during the third quarter, it looks like they can use some education about the folly of the Black Scholes model as well. Apparently there are a lot of us out here that are still missing the flaws of Black Scholes that you so readily see. Regards, Huey