Volume 16, No. 6

 

Where Art Thou, O Options?  S&P 500 Stock Comp Trends  In 2006, after more than a decade of wrangling, investors were finally treated to earnings containing the cost of all employee stock compensation issued. Those figures included the value of stock options, long invisible in the income statement due to an exception built into accounting standards. Statement 123(R) eliminated that exception. Despite all the corporate trepidation surrounding the implementation of Statement 123(R), its effects were downright tame. Investors didn't crunch the stock prices of companies with plenty of recorded option compensation; they chose to ignore it - or were led to ignore it by those same companies. Market observers worried about the effects of stock option recognition on profits for years - but after implementation of Statement 123(R), the S&P 500's earnings still advanced a healthy 17% in 2006. Even though all manner of stock compensation is fully accounted for in financial statements now, firms still employ it readily. At the same time, valuation of stock options granted also remains a constant concern for investors. This report examines trends in stock compensation - for restricted stock and options - in the S&P 500.

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