This blog speculated that accounting for option grants as a deductible expense, a rules change that took effect in 2005, would hurt the ability of law departments to attract new hires (See my posts of Nov. 14, 2005 related to demographic changes and April 30, 2006.). This blog speculated wrongly.
A study reported in the NY Times, July 16, 2006 at BU5, “finds no evidence that the accounting change has had a dampening effect on the number or value of options that the average publicly traded company grants to its executives.” Not only did the sheer number of options granted not decline, but also neither the number of years before the options expire nor their strike price — the price over which the underlying stock must rise before the options have value — did not change.
For more on different aspects of stock options, see my posts of Jan. 27 and April 23, 2006 on option costs included in departmental budgets, as well as Aug. 3, 2005; Jan. 17, 2005 on the Black-Scholes formula for valuing options and Jan. 24, 2006 on software to calculate it; March 28, 2005 on stock options as one reason to go in-house; July 5, 2006 #2 on the value of options granted to Yahoo’s general counsel and Feb. 1, 2006 on their value granted to Texas general counsel; Jan. 27, 2006 on grants to inventors who obtain patents; Sept.17 and Oct. 18, 2006 on the law department’s role in the task of tracking option grants and exercises.).