Forum Post: Stock Options inflate Executive compensation and should be illegal.

Dear Sir:

Making stock options illegal should be the primary focus of the Occupy Wall Street movement because they are misleading investors through inaccurate accounting, and are responsible for inflating executive pay to over 350 times that of the average worker. If they can't be abolished, they should at least be accurately accounted for by expensing the difference between the strike price of the option and the repurchase price of the resulting stock. This proposal would substantially cut executive pay and make financial statements more accurate by correctly expensing stock option gains, which currently account for over 80% of executive compensation.

Furthermore, shareholders should also be able to nominate Directors and approve by majority vote all executive pay packages over $1,000,000. Please see the attached letter that I sent to Steve Forbes and the SEC in response to an article in his magazine in 2005.

Lax accounting for stock options has allowed the compensation of American CEOs to balloon to more than 170 times that of the average worker, compared to 22 in Great Britain, and 11 in Japan. The median salary for CEOs of the 100 largest U.S. companies hit 17.9 million dollars in 2005, which is up 25% since 2004. Stock options have turned the stock market into a gambling casino, and the failure of the SEC to require companies to charge stock option gains against revenues on the income statement has allowed executives to reap billions of dollars in unrecorded compensation, and caused executive pay to skyrocket to over 170 times that of the average worker. This could cause a bailout of federally insured pensions, because companies are using retained earnings to repurchase stock from executives who have exercised stock options, instead of funding employee pensions. Therefore, I believe that stock options and warrants should be illegal, or at least properly accounted for, in order to ensure the accuracy of financial statements, and avoid a government bailout of federally insured pensions.

Concerned Investor,

Richard Golladay/CPA