When I set out to write this book, my topic was stock options.
Specifically, my intent was to explore the much debated issue of
expensing stock options. While that remains an essential theme of
this book, it is impossible to address stock options without looking
at the broader picture. Put another way, stock options are the trees;
executive compensation and effective corporate governance are the
“This is an excellent book for anyone interested in the important
discussion of stock option expensing and, more significantly, the
optimal use of stock options in compensation plans. It is written
from the point of view of an experienced and knowledgeable com-
pensation consultant who has advised board compensation com-
mittees and talked with many people outside the field considering
the economic and incentive effects of the overuse of stock options in
the 90s.”—John M. Biggs, former Chairman & CEO of TIAA-
In response to various pressures, businesses have begun to report externally on their
environmental policy and performance. The significance of such external reporting depends on
the extent of changes in management culture and systems and on how new measures influence
management decisions. The 'greening of accountancy' involves a reappraisal of how to identify
and measure the relevant costs of processes and products (such as 'Total Cost Assessment') and
a redesign of incentive mechanisms.
Four major changes have taken place following these scandals. First, the
nature of the audit industry has changed. Three of the Big 4 audit firms have
either divested or publicly announced plans to divest their consulting businesses.
2 Second, Arthur Andersen, formerly one of the Big 5 audit firms, has
gone out of business. Third, in July 2002, President George W. Bush signed
the Sarbanes-Oxley Bill (also known as the Corporate Oversight Bill) into
law. This law imposes a number of corporate governance rules on all public
companies with stock traded in the United States.
Public corporations in East Asia typically have low levels of transparency and
disclosure quality. Some commentators and policy advisors believe that a closer
adherence to international disclosure rules and the adoption of international accounting
standards are essential for improving corporate transparency in the region (World Bank,
1998). Despite efforts to impose stricter reporting rules and standards, the general
perception is that corporate transparency has been declining (Asian Wall Street Journal,
November 24, 1999).