The NASPP Blog

It looks like hope of being the next Randall Heron and Erik Lie (of the options backdating study fame) remains alive in the world of academia. Three studies relating to stock compensation have recently been published.

Non-GAAP and Street Earnings: Evidence from SFAS 123(R)

This study looks for patterns in decisions to exclude stock compensation expense from non-GAAP earnings and earnings forecasts.

Somewhat predictably, the study finds that companies exclude stock compensation expense from non-GAAP earnings when doing so presents a more positive financial picture of the company to investors (e.g., increases or smoothes earnings, or helps the company achieve earnings benchmarks). Financial analysts, however, exclude stock compensation expense from earnings forecasts when doing so helps them to better predict future earnings performance. Hmmm, now that I’ve written this, it seems hard to believe a 52-page study was needed to figure this out.

Incentives, Targeting and Firm Performance: An Analysis of Non-Executive Stock Options

In a nice counterpoint to the study “Employee Stock Options and Future Firm Performance: Evidence from Option Repricings,” that I blogged about in August (“Repricing and Company Performance,” August 31, 2010), this study finds that companies with broad-based options programs have better operating performance (based on return on assets), at least in smaller companies and in companies with higher growth opportunities per employee. The authors believe that options encourage cooperation and mutual monitoring among employees and may also serve to attract and retain higher quality employees.

Exercises of Executive Stock Options on the Vesting Date

This study looks at whether executives that exercise their stock options on the vesting date are motivated to do so by confidential information they have about the company. The study concludes that vesting date exercises are more likely motivated by the executive’s need to diversify his/her portfolio.

Time Has Run Out!
All NASPP memberships expire on a calendar-year basis–if you haven’t already, renew your membership for 2011 today.

Got Questions on Section 16?
Alan Dye has the answers. Email your burning Section 16 questions to adye@section16.net and Alan will answer them during his popular, annual Q&A webcast on Section 16.  This year’s webcast will be held on January 25; this is your one chance all year to get answers from one of the nation’s foremost authorities on Section 16–don’t miss it!

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

• Purchase the audio for the 18th Annual NASPP Conference.
• Submit your questions to adye@section16.net for the Jan 25 webcast, “Alan Dye on the Latest Section 16 Developments.”
• Submit your questions for the Feb 3 webcast “Ask the Experts: Last Chance to Ask Questions About Section 6039 Returns.”
• Complete the Compliance-O-Meter quiz on Section 6039.
• Take the “Question of the Week” challenge.
• Renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today).
• The Boston NASPP chapter wins the race to have the first chapter meeting of the year! If you are in the Boston area, don’t miss the meeting on January 14.

– Barbara