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To: GST who wrote (160017)	3/31/2004 11:35:31 AM
From: SI Dave	Read Replies (1) \| Respond to of 164684

I agree with you in that they are a compensation expense. The problem comes in terms of valuation, because they have restrictions in terms of vesting schedules and expirations, plus all of the other Black-Scholes type variables. Outright granting of shares, even with vesting restrictions, removes all of the ambiguity regarding valuation at the time of the grant or vesting anniversaries. The expense can be taken based on unambiguous market valuation, whether it be at the time of grant or subsequent vesting events. It would be easy to set up standardized rules regarding the periodic mark-up(down) and the maintenance of reserves related to non-vested grants.

To: GST who wrote (160017)	3/31/2004 1:09:59 PM
From: Lizzie Tudor	Read Replies (2) \| Respond to of 164684

if the employee can't walk away from the company with any value of those options (as is the case when you value them at grant) then you really can't call them compensation. I know we have discussed this before and there is no need to rehash this now, but imo this issue of calling something an expense when the recipient cannot receive any value is the fly in the expensing ointment and pro-expensers should just let this one go. You can't really win this argument claiming something is compensation but not available as a form of compensation to the grantee at the same time. I suspect this issue gets skirted with a "options must be expensed" requirement with no guidelines.