Thursday, April 14, 2005
The SEC delays expensing of stock options
The Securities and Exchange Commission, for once taking pity on our nation's overwhelmed chief financial officers, has delayed the implementation of FASB Statement 123R, the Financial Accounting Standards Board's pronouncement requiring public companies to run the expense of employee stock options through their income statements. On account of the delay, most companies won't have to start complying until the first quarter of 2006.
This short postponement is not a sop to the plutocrats or a slap in the face of stockholders (although some will argue that it is -- I can hardly wait to see what Paul Krugman says at his next opportunity), but a long overdue recognition that determining the value of an option with a lot of embedded restrictions is far easier said than done. Nobody -- and especially not stockholders -- will benefit if companies rush through their valuation of options and the restructuring of their compensation plans. Besides, the CFOs need a break.
Our CFOs are burdened with brutal new requirements that have exhausted them and their staffs. Many have labored long hours in the last year to meet the requirements of Sarbanes-Oxley 404 (requiring public companies to implement extensive new internal controls), and now find themselves policing their "processes" rather than building substantive value in the business. The brave new world has, to be blunt, taken much of the satisfaction out of the job, and CFOs have been quitting in droves. This means that many more companies than usual are breaking in new financial management. The SEC's brief delay, which will give CFOs a breather before their next big change, is necessary to ensure that the expensing of options is done with the deliberation that stockholders deserve.
This short postponement is not a sop to the plutocrats or a slap in the face of stockholders (although some will argue that it is -- I can hardly wait to see what Paul Krugman says at his next opportunity), but a long overdue recognition that determining the value of an option with a lot of embedded restrictions is far easier said than done. Nobody -- and especially not stockholders -- will benefit if companies rush through their valuation of options and the restructuring of their compensation plans. Besides, the CFOs need a break.
Our CFOs are burdened with brutal new requirements that have exhausted them and their staffs. Many have labored long hours in the last year to meet the requirements of Sarbanes-Oxley 404 (requiring public companies to implement extensive new internal controls), and now find themselves policing their "processes" rather than building substantive value in the business. The brave new world has, to be blunt, taken much of the satisfaction out of the job, and CFOs have been quitting in droves. This means that many more companies than usual are breaking in new financial management. The SEC's brief delay, which will give CFOs a breather before their next big change, is necessary to ensure that the expensing of options is done with the deliberation that stockholders deserve.
0 Comments:
