Not just tech companies…

April 2, 2004

So now that FASB has officially declared that companies need to stop burying their stock option expenses in the footnotes, look for things to really get ugly. Ten years ago, opponents of stock option expensing, led by Sen. Joseph Lieberman, managed to stop FASB by painting the proposal as anti-American, as stifling innovation, as hurting the proverbial little guy. They were wrong then, and they’re wrong now! There’s no problem with giving away options, even giving away lots of options. But they are an expense and should be treated that way. Average investors shouldn’t have to dig through the footnotes to find out the true cost. While tech executives have certainly been the biggest whiners and are already protesting FASB’s decision on Wednesday, this doesn’t just impact them. Take American Eagle Outfitters (AEOS) , which is in the decidedly low-tech business of teenage fashion. They recently reported earnings of 84 cents a share for the year ended Jan. 31. Expensing options would have lowered that number to 64 cents a share, though American Eagle investors have to dig through the footnotes in the K that came out yesterday to find that detail. I won’t even really get into the fact that they also lowered the volatility, which means the 64 cents is already a polished number. Investors deserve real numbers! So let your elected officials in the House and Senate know that you’re watching to see if they’ll kow-tow to lobbyists and special interests once again. Perhaps, if we make enough noise, they’ll reall stick up for the little guy — the individual investor.

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