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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: milan0 who wrote (34598)	7/16/1998 4:35:00 PM
From: Dale J.	Read Replies (1) \| Respond to of 1571405

Mike, Thanks for the information. Initially I thought Ali was just joking about this whole matter, but now I see there really is something to it. From the Forbes article: One way to cover the cost of delivering options to workers, says Daniel Murray, is to buy the equivalent amount of listed options in the open market at the time of the option grant. This would immunize the company against price increases in the stock, and prevent earnings dilution. I thought this is what Intel might be doing, hence my comment about $50k options bought on the market and given to employees, this would not dilute earnings, and the $50k would show up as an expense on the P & L. I agree options are a form of compensation and I thought FASB would require they show up as an expense on the P & L. If the options showed up on the P & L, shareholders wouldn't stand for these huge giveaways. From the Forbes article: From January 1987 to June of last year Dennis Beresford, now an accounting professor at the University of Georgia, was the chairman of the Financial Accounting Standards Board. During his tenure, FASB tried to figure a better way to account for the costs of burgeoning stock option plans on a company's financial statements. "It's hard to argue that they're any different from cash compensation or any other employee costs," says Beresford. "FASB felt it was a cost." The board tried to come up with a standard that would require companies to run option costs through their P&L. But the effort became political roadkill after the BigSix accounting firms and much of corporate America lobbied heavily against it. "The argument was: reduced earnings would translate to reduced stock prices," recalls Beresford of the brutal battle that finally buried the idea in 1995. "People said to me, 'If we have to record a reduction in income by 40%, our stock will go down by 40%, our options will be worthless, we won't be able to keep employees. It would destroy all American business and Western civilization,' " he says. The bull market was more important than accurate financial reporting. Truly amazing. It is incredible how CEO's and senior management can loot a company. As the article pointed out, even companies with dismal performance often get the options as a bonus. Ali is right, this really is a ponzi scheme. The answer is simple though, FASB should require it show up as an expense, that would in turn hurt the stock price and shareholders would then in turn put a stop to it, or at least curtail it to a reasonable level and based on performance. Dale