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

To: Don Lloyd who wrote (707)	9/18/2004 5:46:40 PM
From: hueyone	Respond to of 786

<<How does this improve comparability between companies?>> It's all relative Don. The system with the least amount of comparability between companies is the system that is in place right now --- whereby two companies can be performing exactly the same, but one company reports great profits because they compensate employees in stock options which do not have to be reported on the income statement as an expense, while the second company reports negative profits because it pays an equivalent compensation amount to employees in cash which does have to be reported on the income statement as an expense. These two equivalent companies can even keep the same amount of shares outstanding if the first company that issues stock options repurchases shares equal to the stock options that are exercised. Imo, the current FASB proposal is a vast improvement over the current system which has a no expense reporting loophole which many tech companies have been merrily exploiting all the way to the bank to maximize insider incomes. JMHO, Huey

To: Don Lloyd who wrote (707)	9/19/2004 7:26:58 AM
From: rkral	Read Replies (1) \| Respond to of 786

Don, re "How does this improve comparability between companies?" In brief: Comparability of companies is improved by expensing all employee compensation ... including fixed employee stock options. The option value -- like the premium on publicly traded option exchanges -- is based, in part, on the price volatility of the underlying stock. All else being equal, a call option writer demands a higher premium when the volatility is greater ... to compensate for the increased risk of holding the underlying. Simple as 1 .. 2 .. 3 .. almost. Ron