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US fincos to treat stock options as cost to company
New York, Aug 15: A group of top US finance companies, including Merrill Lynch and Morgan Stanleyon Tuesday said that its 18 publicly traded members would treat stock options as a cost, to rebuild faith in corporate America after Enron`s collapse.
New York, Aug 15: A group of top US finance companies, including Merrill Lynch and Morgan Stanleyon Tuesday said that its 18 publicly traded members would treat stock options as a cost, to rebuild faith in corporate America after Enron’s collapse.
Members of the so-called Financial Services Forum, many of whom have already said they would expense options from profits include Citigroup, JP Morgan Chase, Bank One, Goldman Sachs, American International Group, Bank of New York, Prudential Financial, Household International, American Express, Bank of America, FleetBoston Financial, MetLife, State Street Corp and Wachovia. Critics have argued that failing to log options as a cost makes profits look artificially high — a sensitive issue after a string of accounting scandals from Enron to WorldCom damaged investors confidence in corporate accounting and management. “It is an essential step toward restoring the public’s trust in corporate America,” the forum’s president, Rick Lazio, said in a statement.
Mr Lazio was a Republican New York congressman who lost a November ‘00 Senate election contest to then-first lady Hillary Clinton. But some companies have been reluctant to expense options, because they say there is no uniform way to value options. The forum, which will require the move, said it looked forward to working with regulators and accountants to devise an accurate way to value options.
For some, expensing options could be expensive. Merrill Lynch, for example, had $1.4 bn in pre-tax stock option compensation, according to a recent report by Bear Stearns. Merrill’s ‘01 earnings, excluding September 11-related expenses, were $2.4 bn. Bureau Report
Members of the so-called Financial Services Forum, many of whom have already said they would expense options from profits include Citigroup, JP Morgan Chase, Bank One, Goldman Sachs, American International Group, Bank of New York, Prudential Financial, Household International, American Express, Bank of America, FleetBoston Financial, MetLife, State Street Corp and Wachovia. Critics have argued that failing to log options as a cost makes profits look artificially high — a sensitive issue after a string of accounting scandals from Enron to WorldCom damaged investors confidence in corporate accounting and management. “It is an essential step toward restoring the public’s trust in corporate America,” the forum’s president, Rick Lazio, said in a statement.
Mr Lazio was a Republican New York congressman who lost a November ‘00 Senate election contest to then-first lady Hillary Clinton. But some companies have been reluctant to expense options, because they say there is no uniform way to value options. The forum, which will require the move, said it looked forward to working with regulators and accountants to devise an accurate way to value options.
For some, expensing options could be expensive. Merrill Lynch, for example, had $1.4 bn in pre-tax stock option compensation, according to a recent report by Bear Stearns. Merrill’s ‘01 earnings, excluding September 11-related expenses, were $2.4 bn. Bureau Report