eBay Clings to Its Options Habit

But outside analysts are more skeptical of the company's motives.

"Options are the dirty secret of corporate America," said one portfolio manager, who asked not to be named. The manager holds no position in eBay.

"The inner circle at a company benefits disproportionately, while diluting the hell out of shareholders who have not taken an active role in reining in excesses.

"But who's going to really complain, given what the stock has done," the manager continued. "And that's the problem. The stock would have done this if these guys had gotten paid one-fourth of what they've gotten."

Last year, eBay executives received 5% of the total options granted by the company. That was a significantly higher portion than executives at Cisco (CSCO Quote), Intel (INTC Quote) and Amazon.com (AMZN Quote).

Options' Bad Rep

The corporate scandals over the last two years have brought stock options into the spotlight. The excesses seen at companies such as Enron, WorldCom and others have been blamed in part on the incentive that options give executives to do whatever they can to boost short-term share prices.

But stock options also have gotten a bad rap because of the way they are treated under accounting rules. Although many critics argue that options are an expense that should show up on income statements, companies such as eBay have been able to keep them off their earnings reports, merely having to footnote them in their filings with the Securities and Exchange Commission.

Because companies don't have to show how much options are costing them, many have been granting excessive amounts of options, severely diluting shareholder value, critics charge. That also puts pressure on companies to continually buy back their own shares rather than return the money to shareholders in the form of dividends.

eBay, for instance, has made a name for itself as one of the few consistently profitable Internet companies. But its track record wouldn't look so good if it had to treat options as an expense.