ISS Launches Expensing Evaluator

Institutional Shareholder Services (ISS), which provides guidance on corporate governance and other issues for institutional investors, is making available a reporting system that calculates the compensation expense of stock options according to the Hull-White Lattice model for valuing employee stock options. The model was one of those recommended by the Financial Standards Accounting Board. It incorporates expected employee exercise behavior. ISS criticized current practices in stock option expensing, saying there was enormous variability from the Hull-White model and a median reported expense over 30% lower than the model predicts. ISS laid the blame on too many companies using assumptions too favorable to the company.