On the other hand, companies could make in the money grants.
While they offended corporate shareholders, had to be expensed by the corporation, and had less favorable tax consequences, they had other advantages.
In this regard, we identified stock options grants as a potential trouble spot several years ago well ahead of the curve.
At the same time, there was sharp rise in the overall level of executive compensation (some would say astronomical), despite the million-dollar salary deductibility cap.
In this environment, cash-strapped companies found stock options an attractive way to provide competitive compensation without further tapping their limited cash flows.
These rules, in combination with the prescient provisions of Sarbanes-Oxley requiring timely reporting of stock option grants, will go a very long way toward preventing the kinds of problems we are seeing today from occurring to the same degree in the future.
Second, in September the Office of the Chief Accountant issued guidance for companies trying to cope with the financial reporting ramifications of their various historical options practices from a reporting perspective.
At the money options and other forms of performance-based compensation became even more attractive when the $1 million salary deductibility cap was enacted.
So, from the shareholder, accounting and tax perspectives, at the money options had certain distinct advantages.At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.Over time, shareholders objected to the fact that the options were granted in the money and eventually many companies developed stock option plans in which grants could only be made at the money that is, at the closing price of the stock on the day of the grant.At the same time, in a related criminal action brought by the US Attorney, Kreinberg pled guilty to securities fraud and conspiracy to commit securities fraud, mail fraud and wire fraud, and he now faces up to 15 years in jail, mandatory restitution and a possible criminal fine.Despite all the recent media attention, Brocade and Comverse are not the SEC's first stock options cases.For example, at the money options received more favorable accounting treatment they did not need to be expensed.