Chicago (Oct. 14, 2002) -- More than half of 120 Fortune 1000 companies polled are postponing a decision on expensing employee stock options, while only 8 percent plan to begin expensing options within the next year, according to a survey by Deloitte & Touche.
Another 35 percent said they won't expense options unless mandated by legislation and/or regulatory changes, D&T reported. Nearly half (49 percent) of the respondents said they are waiting for more clarification and standardization in the methodology for expensing stock options. Sixty percent cited determining a proper valuation methodology as the single most difficult issue regarding options expensing.
"Another wave of prominent companies announcing plans to expense options, in addition to the Financial Accounting Standards Board's announcement about converging its standards with the International Accounting Standards Board's, could trigger an options-expensing Tsunami," noted Michael S. Kesner, partner in D&T's Performance Management and Compensation Practice.
Expensing options, combined with efforts to keep within stock dilution guidelines, will force many companies to cut back on grants to senior managers and perhaps eliminate them entirely for middle managers and professionals, according to Kesner, who said he expects "a very large correction in executive pay."
While stock options are the only long-term incentive program for 72 percent of respondents, most said they're looking at adding other compensation alternatives. Sixty-one percent are considering a return to cash-based performance plans, 49 percent are looking at performance-vested stock options, while 45 percent are evaluating performance-vested restricted stock.
-- Electronic Accountant Newswire staff
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