Fuzzy Logic
The Oracle of Omaha weighs in with an Op-Ed in today's Washington Post on a bill to be considered by the US House of Representatives which proposes to treat company stock options in a manner that Buffett characterizes as mathematical lunacy.

Until now the record for mathematical lunacy by a legislative body has been held by the Indiana House of Representatives, which in 1897 decreed by a vote of 67 to 0 that pi -- the ratio of the circumference of a circle to its diameter -- would no longer be 3.14159 but instead be 3.2. Indiana schoolchildren momentarily rejoiced over this simplification of their lives. But the Indiana Senate, composed of cooler heads, referred the bill to the Committee for Temperance, and it eventually died.


What brings this episode to mind is that the U.S. House of Representatives is about to consider a bill that, if passed, could cause the mathematical lunacy record to move east from Indiana. First, the bill decrees that a coveted form of corporate pay -- stock options -- be counted as an expense when these go to the chief executive and the other four highest-paid officers in a company, but be disregarded as an expense when they are issued to other employees in the company. Second, the bill says that when a company is calculating the expense of the options issued to the mighty five, it shall assume that stock prices never fluctuate.

posted by ubaid - Tuesday, July 06, 2004 at 7:05 PM - 2 comments - post anonymously