Dominating Business Week's list of those with the most valuable option profits to come are tech companies big and small. Since the end of fiscal 1999, however, the stock has fluctuated because of questions about the company's accounting and the disclosure of an SEC inquiry. It looks as if executives, frustrated by their stock prices, are developing a new appetite for cash. In 1999, the average CEO earned an astonishing 475 times the average wage of a blue-collar worker. You retain people by having the coolest products and a good business proposition.'' The simplest way to fix a broken option, of course, has been to exchange them for new ones at the lower price, commonly called repricing.
Shareholders hate the practice because it separates the interests of top execs from their own.
But repricings are not so easy to pull off anymore, thanks to the Financial Accounting Standards Board. On Mar. 31, the group formalized its long-debated ruling that any company that cancels underwater options and reissues them at a new lower price must take a potentially substantial charge against earnings. Of the 1999 proxies filed so far, just a handful of companies undertook repricings. At Philip Morris Cos. The perceived need to keep inflating top paychecks isn't limited to old-style companies.