Morgenson's funny numbers

Gretchen Morgenson continues her obsessive tirade on executive compensation in general and options in particular. 

Morgenson starts by informing us that backdated options cost corporations money.  Not many points for originality there.  The backdating makes options more expensive, other things equal, because in-the-money options are more expensive than at-the-money options. We're not yet at theory-of-relativity level insight. Moreover, this doesn't make backdating suspect. The only thing that makes backdating problematic, as I’ve said repeatedly, is if the practice isn’t adequately disclosed or accounted for.

Morgenson seems to realize that she doesn't yet have the stuff of a weekly column in a world famous newspaper.  Her readers must want more, especially since this is her millionth column on exactly the same subject.  It must be tough writing every week without much to say.

So Morgenson desperately reaches for a real blockbuster:

you can also weigh option costs another way — by analyzing how much money companies must spend to buy back shares that the granting of options creates. Amounts spent on these buybacks . . . reduce a company’s net worth. . . .

What Morgenson wants us to believe is that if executives pay $9/share for optioned stock and the company later pays $18.00 for its shares, the cost of the options to the company is not the the cost of the options to the company as we have always thought but the $9/share difference between the insiders' price and the eventual buyback price.

Morgenson also leverages her point, as usual, by attempting to confuse it with two separate issues -- whether the company should be spending shareholder money to buy its stock, and whether one company, Altera, should have sent an analyst to the penalty box for criticizing its buybacks, a story Morgenson heavily flogged last year.  Morgenson evidently hopes no one will notice that these stories have nothing do with the cost of the options. 

Lucky for Morgenson there's no law against funny accounting by journalists.