Buffett Calls House Bill on Options ‘Lunacy’
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Billionaire investor Warren E. Buffett says a House bill to limit companies’ stock-option costs is “mathematical lunacy” that members should kill.
The bill would weaken a proposed rule from the Financial Accounting Standards Board by requiring companies to deduct from earnings the cost of options granted only to the top five executives. It also says that in calculating the value of those options, a company would be able to assume that its stock price won’t change.
“Give the bill’s proponents an A for imagination -- and for courting contributors -- and a flat-out F for logic,” Buffett, chief executive of Berkshire Hathaway Inc. and the world’s second-richest man, wrote in an opinion piece in the Washington Post on Tuesday.
The provision assuming no fluctuation in the stock price is an “Alice-in-Wonderland assumption” that serves only to undervalue options grants, Buffett said.
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