Looking out for the little guy?

May 4, 2004

The next time you read a story or hear something on TV about how expensing stock options is going to hurt the little guy — the favorite argument of the SaveStockOptions.Org folks — just think about the new Chief Executive of The Pep Boys (PBY). Last year, the proxy notes that Lawrence Stevenson, who was named CEO at the end of last April, received 58% of the stock options granted to employees last year. That’s in addition to a generous compensation package that included a $500,000 signing bonus. The average price of the options granted to Stevenson was $8.70 and 20% were exercisable immediately. Pep Boys is currently trading at over $27 a share, so those are some pretty valuable options. The remaining options vest equally over the next four years. Of course, Pep Boys is far from the only company doing this. Recent proxies show lots of other examples of generous options grants to executives, including at Cablevision (CVC) where top executives receieved nearly 3/4 of the options granted last year. Watching high-priced lobbying firms trying to convince Congress that expensing options is bad because it hurts ordinary workers ought to be comical. But given the fact that they were successful once before in putting an end to FASB’s attempt to expense options 10 years ago, it’s actually pretty scary.

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