VideoDISCLOSURE RULE
Tabula Fuller
The Securities and Exchange Commission wants companies to present their stock option compensation plans in neat, easy-to-read tables, rather than relegate the information to a footnote. To that end, the commission released a proposed rule calling for the tabular disclosures to be included in proxy statements, when companies submit a plan for approval by shareholders, or in 10Ks in years when companies aren't seeking shareholder approval. The SEC says the proposed rule addresses the commission's concerns about the absence of full disclosure to stockholders regarding the plans, the potential diluting effects of the plans on shareholder value, and the adoption of the plans without shareholder approval.
But opponents of the proposal, including Microsoft Corp., raise several objections. Chief among them is that the rule duplicates reporting requirements imposed by the Financial Accounting Standards Board and contradicts the SEC's own efforts to streamline reporting.
Other firms are more sanguine about the idea. "The SEC is proposing modest additional disclosures, and that's not a problem for us," says Cary Klafter, director of corporate affairs for Intel Corp., in San Jose, Calif. However, he adds, the proposal should allow companies to aggregate, or exclude, information on select plans. "Some companies have a large number of stock option plans that they've inherited from mergers," he explains. "If we had to disclose all the data for each of those plans, we'd have a large block of information that really wouldn't be very meaningful to the reader."
Still, the idea has garnered some support. "While most of the information that would go into the table is already available in one form or another," observes Brian Borders, president of the Washington, D.C.-based Association of Publicly Traded Companies, "the idea of making it available in a tabular form is a good one." -- John P. Mello Jr.
TABLE TALK
The SEC wants 10Ks to clearly display the number of securities:
- authorized by the board
- issued upon the exercise of options
- remaining available for future issuance
WHAT'S REAL
According to MVC Associates International, 35% of U.S. firms fail to create real value (operating profit after tax after cost of capital) because they apply incorrect performance measures.
97% OF STATE AND LOCAL economic development agencies cite attracting high-tech investment as a top priority, reports KPMG.
M&A
Catch-as-Cash-Can
With the equity markets down and initial public offerings virtually nonexistent, fewer merger deals are putting stock in stocks. In the first four months of 2001, 30 percent of mergers relied solely on cash, the highest level since 1996, according to Thomson Financial Securities Data in New York. "Sellers used to be moderately indifferent about accepting equity, but when stock declines in value and becomes more volatile, equity becomes less attractive," says Brian Heckler, a partner with KPMG.
One sector that has seen a dramatic shift to cash is the traditionally stock-rich technology realm. Forty-five per-cent of deals in the sector have relied solely on cash this year, compared with 15 percent last year, reports Thomson. "The risk profile of stock is so high right now, no one is really willing to take it," says Paul Hammer, head of the technology, media, and telecommunications group at Houlihan Lokey Howard & Zukin, a Los Angeles based investment bank. "About the only people doing deals," he says, "are private equity shops that always use cash, or the financially stable dinosaurs that are sitting on pots of cash."
Indeed, big technology firms with sagging stock prices have been bargain hunting for strategic deals with their
cash caches. IBM Corp. sprang for Cambridge, Mass.-based Mainspring Inc., an Internet strategy consulting firm, in April with a $4 per share cash bid. The price reflected a 25 percent premium over Mainspring's trading price of $3.20, but was considered cheap because the stock traded at an average of $5.09 in the fourth quarter of 2000. In March, Eastman Kodak Co. halted its stock buyback program $200 million shy of its $2 billion target so that it could go shopping. CFO Robert Brust says he wants to be certain Kodak is ready to seize growth opportunities.
Another reason for the prevalence of cash is the nature of recent transactions, says Rick Escherich, a managing director at J.P. Morgan. He says the volume of deals involving public company subsidiaries and private companies--both of which tend to rely heavily on cash because they don't stand to gain from pooling--rose relative to deals between public companies, which are more likely to use stock. Also, cash is likely to become more popular among public companies when pooling ends this month, adds Escherich, because the accounting benefits of all- stock transactions will be diminished. -- A.N.
BREAKING GLASS
Deloitte & Touche and Deloitte Consulting have promised to double the number of women promoted to partner/director by 2005.
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