Friday, September 15, 2006
Debunking Big Lies About Stock Options
Powerful lobbies are trying to repeal stock option expensing. If you own almost any high-tech company, you'd better take five minutes to understand why--or you're likely to get fleeced.
Here are the three big lies upon which the opposition to stock options expensing is founded.
Big Lie Number One: There is no way to know the expense, if any, of stock option grants.
Big Lie Number Two: Stock options aren't an expense.
Big Lie Number Three: The cost of stock options is already reflected in diluted earnings per share.
posted by Brian Moran @ 10:18 AM
Thursday, September 14, 2006
New rules encourage battles in boardroom
The spying scandal at Hewlett-Packard has provided a rare window into a normally private, august institution -- the corporate board of directors.
It revealed an HP board wracked by turmoil in recent years. There was the battle led by a board member to stop the firm's merger with Compaq Computer. Then came the board's ouster of Carly Fiorina as chief executive. And now the snooping debacle.
Some say the contentiousness of HP's board is emblematic of an era when boards are being held more accountable. Under the Sarbanes-Oxley Act of 2002, companies and boards have to comply with a host of new financial and governance rules. Companies also face more shareholder activism and a movement toward more independent, outside board members. In this new environment, board controversy and dissent are more likely -- and scrutiny of boards has become intense.
Well before the HP scandal erupted last week, directors had been under growing pressure to prove themselves worthy of the job or face shareholder wrath. The fallout from Enron and changes in laws affecting boards and companies have increased the pressure on boards.
posted by Brian Moran @ 10:12 AM
Thursday, September 07, 2006
GRC Emerges From the Shadow of Compliance
Myriad compliance requirements, over the years, have caused most companies to initially jump through hoops when a new one comes along, with the most visible (and some might also say painful) concern being Sarbanes-Oxley (SOX) compliance. In time, panic was replaced with rational thought and a workable plan of how to meet the legal and regulatory requirements while streamlining business processes and mitigating risk.
With such intense focus on short-term concerns, companies sometimes miss the real long-range objective: a better-managed and optimally performing organization.
Emergence of GRC as discipline and software category
Governance, risk management, and compliance (GRC) as a term has been bandied about for a few years. AMR Research defines each component of GRC as follows:
* Governance is the oversight role and part and parcel of setting strategic objectives.
* Risk management evaluates all relevant business and regulatory risks and controls and monitors mitigation actions in a structured way.
* Compliance is the execution of these objectives, based on risk tolerance.
posted by Brian Moran @ 8:35 AM
Wednesday, September 06, 2006
The Spring-loaded Options Trap
Spring-loading vs. bullet dodging; why SAS-70 audits are so different; gauging your financial style; more bondholder backlash; the return of the travel agent; why companies still have so much cash; and more.
Options timing is clearly the cause du jour of federal regulators -- and the terror of executives. After announcing investigations into dozens of companies this past summer, the Securities and Exchange Commission and the Department of Justice filed charges against former executives at Brocade Communications Systems and Comverse Technology, sparking what most expect to be an ongoing volley (see On the Record).
While investigators continue to focus on backdated options, companies may well be nervous about regulators' interest in related practices known as spring-loading (timing grants to come ahead of good news) and bullet-dodging (offering them after bad news), both of which aim to capture presumed lows in stock prices for the options' strike prices. Last November, Analog Devices spent $3 million to settle spring-loading charges with the SEC. Cyberonics is still under investigation for issuing options to top officers following Food and Drug Administration approval of a new product but before the market opened. Many others, including Home Depot and Merrill Lynch, have been tainted by The Wall Street Journal' s recent revelations that abnormally large numbers of options were issued soon after the tragedies of September 11.
posted by Brian Moran @ 11:48 AM