Calpers Opposes eBay's Options Plan

In response to the scandals at Enron and WorldCom, accounting regulators are likely to require companies to begin expensing stock options next year. Under current regulations, companies can choose to hide the cost of options in a footnote in their quarterly reports. Governance critics have argued that when companies have to show how much options cost them, they will be more judicious in their use.

Although many Silicon Valley companies have resisted the expensing of options, some have already moved to limit their options grants. Yahoo (YHOO) and Intel(INTC), for instance, have pledged to limit their annual options grants to 2% of outstanding shares. Meanwhile, under fire from investors for its options practices, Siebel (SEBL) cancelled millions of options earlier this year.

In contrast, eBay neither expenses options nor has it made any move to limit their use.

Despite this, Institutional Shareholder Services, the nation's leading proxy advisory firm, announced last week that it would support eBay's proposal to increase its options. The plan's cost came in under a cap set by ISS.

But Glass Lewis, a rival proxy advisory firm has lambasted ISS's analysis. Saying that eBay's plan dramatically fails four of its 10 criteria, Glass, Lewis has recommended that eBay shareholders vote against it.

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