No Longer an Option

They've been up, they've been down. They've been in the money and under water. And they've been all over the headlines.

Now stock options are moving from the small print to the body of financial and proxy statements, and as they do, companies across America are reconsidering their approach to compensation; revisiting the forms of payment they offer; and trying out new ideas for motivating employees, top performers and key executives.

Clearly, there's a lot at stake. The spotlight is shining on the small print of executive contracts as the FASB's financial accounting statement (FAS) 123R and new SEC disclosure regulations require publicly traded companies to treat stock options as an expense and to list not just the salaries and perquisites paid to top executives, but also the philosophy behind them. Some pay experts say all the attention will hold down salaries; others counter that the new visibility will spur competitive pressure to pay even more. One thing is certain: Finance executives will find their knowledge and skills more in demand than ever as advisors to compensation committees -- establishing compensation programs aligned with business objectives, helping guide decisions, quantifying requirements, and representing the best interests of stakeholders to senior executive management and the board of directors.

The backdated stock options scandal, outrageous severance pay packages and extravagant perquisites have forced several essential questions at U.S. companies today: What are best practices in compensation management? What are the best ways to attract and retain top management talent; align the objectives of the organization and its key stakeholders; inspire and reward performance; provide for, at minimum, the full disclosure required; and be perceived as being "above scrutiny" by a cynical investor community? For finance executives, experts agree: Consider compensation management a front burner issue for the foreseeable future.