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Getting Some Things Off My Chest…Stock Options…

February 24, 2005
at 12:00 pm PST

Please read this blog’s disclaimer before reading this one. : )

After the FASB decided to treat stock options as an expense last December, the chairman of that august board was quoted in a Bloomberg story as follows: “Stock options have been a ‘free good’ because their cost was omitted, Herz said today. “Once you have the accounting costs, you get a much more robust debate on the appropriate way of compensating executives.”

So, that definitely confused me, as I thought that the FASB was the Financial Accounting Standards Board and not the Financial Executive Compensation Board. I was under the impression that the FASB wanted to expense options because, to them, it made accounting sense, but all along, it appears they wanted to work on the executive compensation issue. I don’t remember voting for any of the FASB members in the last election. Do you? I’m not an apologist for executive compensation, but in reading the FASB mission statement, I don’t see anything in there about being the judge and jury on corporate compensation. (See statement below).

“The mission of the Financial Accounting Standards Board is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.”

Help me understand their role in executive compensation. Or their role on the economy -- and the potential impact that expensing stock options would have. Yes, the House passed legislation last session on this (by a 3 to 1 margin) and 53 Senators sent their concerns to the SEC on this, but the June 15 date still looms (expensing of stock options is to begin at the first interim or annual reporting period that begins after June 15, 2005).

So, clearly I’m venting, but I think that some questions still need answered…and we’re still working on this. For more information on stock options, please visit the stock options coalition website at www.savestockoptions.org.

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