Letter to Barron's

Messrs. Norton and Shenkir (Options Fix Needs Fixing, Barron's June 20, 2005) made a valuable contribution to the stock option compensation debate. Their sound analysis, which conforms to FASB's conceptual framework, is in stark contrast to rules adopted by those assigned with the task of keeping the capital markets true. This leaves one with the conclusion that the foxes are guarding the henhouse.

Although only mentioned in passing, the authors hit on a very important fact. "The derivatives fair value at settlement is $75 million... Interestingly, if the options qualify for a tax deduction [which it invariably does], the $75 million is deductible." The gatekeepers need to explain to the investing community what economic logic applies to the reasoning that allows a company to deduct the economic cost of stock option compensation for tax purposes, but to exclude it from the income statement.

We need integrity in the standard setting process, or to put more simply, remain true to FASB's conceptual framework and send the politicians packing.

Albert Meyer