Options valuation: beware the hidden bull
Filed in archive executive pay by leon on September 08, 2006
ISS Australia has found that chief executive officers of Australia's biggest companies are getting paid millions of dollars more than what's being disclosed to shareholders because of a mismatch between "fair value" of the options cited in annual reports and actual value.
Like options backdating, the "fair value'' method can mislead because it does not necessarily take into account the bullishness of the market because directors can over-discount what the options are actually worth. When that happens, the chief executive officer gets a bigger payout without needing to put it to the owners of the company.
You can find more details in the ISS Australia report Long term incentives - far from illusory.
You can also read my news report on it here.
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options value ISS Australia executive corporate hidden+bull valuation+beware beware+hidden
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