Thursday, March 29, 2007

Alphabet City

Today's hot business story is right out of Sesame Street: “Federated Steals Letter 'M' from Microsoft.” Federated’s new single-letter ticker symbol is apparently a coup. We don’t get this; going by one letter makes sense if you’re the head of a fictional spy network, but we like tickers that don’t tax our memory, like the ones for CVS (CVS) and IBM (IBM).

A different one-letter outfit, Ryder System, Inc. (R), recently filed an interesting Compensation Discussion and Analysis (CD&A). Interesting in a good way.

The people at Ryder – or R, as they prefer to be called – adopted some simple and sensible rules for granting options. If everyone followed these, maybe we’d shut up.

First, R’s Compensation Committee can no longer approve option grants by written consent; this can only happen at a real meeting, preferably with doughnuts and coffee. Second, the date on which the committee meets and grants the options must officially become…drum roll: the option grant date. You average the high and low sales prices for that day, and that's the exercise price.

It’s smart of R to recognize that having directors grant options at a meeting is much better, governance-wise, than sticking some numbers on a paper consent and asking them to sign it as they’re dashing off to the club. Consents are easy to fudge. (Just ask these guys.) Even if the committee members don’t meet in person but use, say, a phone conference, they can have a real discussion about who's getting how many options and why. But we prefer the in-person meeting; that way if there’s any question about the grant date the company has an audit trail - the grease-stained Krispy Kreme receipt.

You can't make everyone happy, though. Cookie Monster no like doughnuts. Cookie Monster like cookies.