|Corporate America Taking Aim at Reforming Itself|
|Key Words||expensing stock options, decision making|
Corporate America is beginning to voluntarily change the way it views stock options, increasing public disclosure by treating stock options as an employee compensation expense. Bank One, Coca-Cola, and The Washington Post are a few who have adopted this change. Companies who treat stock options as an expense report lower earnings as a result.
This accounting change is primarily a response to the public's growing distrust of corporate America. Rising legal and insurance costs from shareholder lawsuits are also prompting change. Companies are also exploring initiatives like severing ties to accounting firms and ending business relationships with directors.
Opponents to expensing stock options say this it crimp corporate earnings and further depress stock valuations. If all of S&P's 500 companies expensed options, reported earnings would have dropped 21% in 2001.
Expensing stock options will most likely not make a dent in CEO pay, though it may affect those lower on the corporate ladder. It will have a bigger impact on start-up companies who use stock options as a critical component of executive pay.
|Source||"Corporate America Taking Aim at Reforming Itself," Money July 16, 2002.|
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