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VALUEMETRICS: CORPORATIONS WRONGLY SEEK TO AVOID FASB RULE CHANGE THROUGH SEC DISCLOSURE STATEMENTS

 OAK BROOK, Ill., March 29 /PRNewswire/ -- On April 7, the Financial Accounting Standards Board (FASB) may effectively force U.S. corporations to publicly recognize a fact that they continue to avoid: that executive stock options are a cost to shareholders and should be charged against pretax earnings.
 According to James E. Ahern, a vice-president of Valuemetrics, Inc., Oak Brook, a leading financial advisory and business valuation firm, avoidance of that fact has really been brought home with the 1993 proxy season.
 Effective Jan. 1, publicly held corporations have been required by the Securities and Exchange Commission (SEC) to provide more detailed proxy reporting relative to, among other things, executive compensation.
 Among other requirements, corporations must place a value on stock option grants and stock appreciation rights that have been awarded to key, top-level executives. The SEC, explains Ahern, allows one of two methods to determine the options' value: "grant-date value," based on the option's cost at the date of issuance, and "potential realizable value," which assumes annual stock price appreciation of 5 percent and 10 percent for the life to the option.
 Says Ahern: "What we are beginning to see in early proxies and what we will undoubtedly continue to see, is the usage of the potential realizable value method, which fails to provide investors with good information.
 "It also potentially could overestimate the cost of the option," according to Ahern, whose company urges clients to utilize the grant date approach because of its greater accuracy.
 Among the corporations reporting higher-than-necessary executive stock values by using the potential realizable value approach are: Pacific Telesis; General Electric; IBM; Ameritech; B.F. Goodrich; Hewlitt-Packard; and Anheuser-Busch. At least half of the nation's publicly held companies are widely expected to follow suit.
 "The rationale is that if they use the grant-date approach -- with its potentially lower option values -- the FASB will be more likely to force them to recognize that amount as an expense. The companies argue that no method can accurately reflect the value of executive stock options."
 If the FASB does force corporations to treat stock options as an expense, Ahern adds, the widespread concern is that executive compensation committees will tighten the purse strings. "Public companies are risking the immediate ire of shareholders and shareholder activists to protest the proposed FASB rule change," Ahern explains.
 "The fact is that, much as big business wants to dispute this, executive stock options are inarguably a cost to the corporation and shareholders over time, just as salaries and bonuses are," Ahern stresses. "That doesn't make them bad; options have a fundamental economic basis in providing management an incentive to perform in the best interest of the corporation."
 Additionally, he points out, the argument that it's "impossible" to put an accurate value on stock options is inaccurate. "Our nation has a thriving options marketplace that has been utilizing the Black-Scholes pricing model (the model being shunned) with great reliability for many years."
 In trying to avoid what's going to be required disclosure in the future, Ahern adds, corporations are being "unrealistic and unfair to shareholders, since stock options are truly a cost to stockholders."
 Valuemetrics, headquartered in Oak Brook and with offices in New York City and Atlanta, offers a range of services, including valuing options, warrants, common equity, preferred stocks and debt securities. The firm also specializes in structuring and implementing Employee Stock Ownership Plans (ESOPs), advising on mergers and acquisitions, and providing litigation support services.
 -0- 03/29/93
 /CONTACT: Diana Ehrhardt of Valuemetrics, 708-572-9250; or Sally Saville Hodge or Kathleen Quinn of Hodge Communications, 708-328-9180, for Valuemetrics, Inc./


CO: Valuemetrics, Inc. ST: Illinois IN: FIN SU:

AH -- NY066 -- 0537 03/29/93 12:56 EST
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Date:Mar 29, 1993
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