Optional excess and a gold star

August 26, 2005

Stock option issues may seem old-news by now, but there’s still some interesting disclosures going on in the filings. For example, this 8-K filed by Ariba (ARBA) caught my attention because it resurrects a form of corporate largess that used to be very popular: stock option exchanges. Executives get to cash in their underwater options for something that’s actually worth something, which essentially rewards the executives for doing a lousy job at running the company.

Some progressive companies, sensitive to that appearance, allowed ordinary employees to exchange their options, but excluded top executives from taking part. Not Ariba. Chairman and CEO Robert Calderoni exchanged 1.5 million options for 591,668 of restricted stock. CFO James Frankola and EVP Kevin Costello also exchanged options for restricted stock. According to Ariba’s proxy, about half of the options that Costello exchanged, had a strike price of $20.52. Compare that to Ariba’s current price of $5.65.

Another interesting option disclosure came in Flow International’s (FLOW) proxy, which noted that President and CEO Stephen Light receive 100% of all stock options granted to employees last year. Talk about sharing the wealth.

Finally, since it’s a Friday and I haven’t handed out a gold star in quite a few weeks, here’s one for casual restaurant chain Ruby Tuesday (RI), which judging by the proxy it filed yesterday, appears to have abandoned regular meetings at Blackberry Farm, the luxe resort in the Smoky Mountains owned by Ruby Tuesday Chairman and CEO Sandy Beall. In fiscal 2004, the company spent over $80,000 on meetings at the resort. But in fiscal 2005, there’s no mention of the resort in the proxy.

Leave a Reply

You must be logged in to post a comment.