Two good articles from the opinion page of today's Wall Street Journal and its online counterpart. The first (available to fat-cat capitalist subscribers only), by Holman W. Jenkins, one of my favorite scribblers, seeks to defend the much-maligned practice of back-dating CEO stock options:
Let's try to remember -- as some of the subsequent scandal coverage hasn't -- that options typically vest over time, and the value of the CEO's pay package is determined by two factors, not one: The net price of the options multiplied by the number of options.
These simple facts make a mockery of two standard assumptions of the media coverage: that backdating automatically means CEOs were "padding" their pay; and that backdating is the equivalent of being allowed to bet on a horse race after it has been run.
Think about it this way: Options packages don't spring out of the ground, but must be designed and agreed upon. A company and its executive both have an interest in simplifying the negotiation as well as an interest in understanding clearly what the package is likely to be worth.
Why would backdating be appealing in this light? Because it lets one parameter be locked in so negotiation can focus efficiently on the other, the size of the grant. It eliminates a perverse incentive to game the stock price during the negotiation. It leaves a valued executive no reason to grump about the issue date or feel there was any invidious message in its selection, yet the company retains full control over the size of the package.
The second (free to all the wretched refuse), is by Eric Peters and predicts the demise of the new generation of bitchin' Camaro (cue The Dead Milkmen):
The new Camaro will probably die on the vine for the same reasons--and a couple of new ones, too.
And again, it's not all that hard to understand why. Or to see the iceberg dead ahead.
Unlike the Mustang--which has always managed to appeal to a broad base of buyers ranging from young women to old men and everyone in between--the Camaro is and always has been a strutting muscle machine. A car for drive-throughs, Friday night cruising, and teenage boys.
Back in the day, we referred to such vehicles as "penis cars" owing to the belief that the owners must be seeking to make up for certain deficiencies in other areas of their manhood. No, I don't see a lot of gals being in the market for such a ride either.
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