Monday, January 26, 2009

Stock Options Aren't Compensation, Decreed the OTS

I hope the new administration is testing the waters down there in our nation's capital. I mean that literally. I fear someone has been pumping Clueless Juice into the hallway fountains at certain federal agencies.

Check out this bizarre tidbit from the Office of Thrift Supervision, one of those financial regulators we've all come to know and love. Last Thursday the OTS revised the corporate governance guidelines that its examiners are supposed to apply when they evaluate the "safety and soundness" of OTS-regulated banks. Among other stuff, the revision removed a loony sentence about executive compensation that's been lurking in these guidelines since at least 2003. (Haven't had time yet to dig back and see when it first appeared.)

The sentence said:

OTS does not ordinarily consider the grant or exercise of stock options as compensation unless they are sufficiently material in amount or conditioned upon factors that result in incentives that cause supervisory concerns."

How strange is that? Stock options are, and always have been, compensation. Absolutely, unequivocally, uncontroversially. (Yeah, there are some nuances from the IRS point of view, but that's not what the OTS is talking about.) This is like saying: "We don't consider Tootsie Rolls to be candy, unless you eat more than 75 in one sitting."

I guess that if a bunch of lobbyists showed up to convince me that Tootsie Rolls aren't candy, they'd make it all sound very sensible. Of course, I'm only speculating that lobbyists had something to do with this. I don't know how the hell that sentence got in there. It may have been the water.

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