Expensing options will harm law departments’ ability to compete with law firm compensation

Many law departments award stock options to some or all of their lawyers. If companies pull back from doling out awards as generously as before, because the company has to expense the value of the option immediately, law departments will to that degree lose some of their compensation luster. Equity appreciation on those options would otherwise let them compete on comp with law firms (See my post of Aug. 3, 2005 about charging the cost of options to a law department’s budget.) .

Some companies offer arrangements whereby employees can buy stock in the company at 15 percent discount from market, which offers a small recompense.

But if law departments do not need to account for the value of option awards, the change in accounting treatment will harm departments less (See my post of Jan. 27 and April 23, 2006 on option values included in budgets.).