Professor Bainbridge...on law, politics, religion, culture & food

Former SEC Commissioner Laura Unger on Expensing Stock Options

Interesting TCS interview with former SEC Commissioner Unger on stock options. Highlights:

I think the average investor doesn't really understand financial statements. But most investors do understand a narrative that describes what compensation plan for a particular company and whether it includes stock options....

What I think is important to the analyst community or to the analyst generally, is the dilutive effect of options that are exercised. ... By dilution I mean the impact on the number of shares that are outstanding and the impact on existing shareholders that an exercise of options resulting in more shares outstanding has on holdings and the market in general. I can speak from first-hand experience on this because I'm on the board of a software company that issues broad-based stock option plans. The majority of shareholders, the institutional shareholders, care about the dilutive affect of the option grants, not the impact on the bottom-line financials.