As eBay's Stock Soared, Insiders Sold

Many investors charge that the wide use of options encourages short-term thinking and illegal accounting gimmicks by management and overly dilutes their holdings.

In response, regulators are likely to force all companies to expense the cost of options; currently, companies can hide option costs in a footnote in their quarterly reports. Some companies such as eBay rival Amazon.com (AMZN Quote) already have begun to voluntarily expense the cost of stock options. Meanwhile, other companies, including Intel (INTC Quote) and Yahoo! (YHOO Quote), have begun to curtail their use of options.

eBay neither expenses stock options nor has moved to curtail their use.

Calling eBay's options grants "excessive" already, the California Public Employees Retirement System, the nation's leading public pension fund, has said it will vote against eBay's proposal. Other big eBay investors such as Fidelity and Vanguard may follow suit.

Selling High

As eBay's stock has risen, its options grants have turned into big money for its employees. Company employees cashed in options worth an estimated $129 million in the first quarter alone. That works out to an average of some $32,300 per employee at the company.