Accounting: eBay Inc.’s Stock Option Plan

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Table of Contents

Introduction
Discussion
Conclusion
References:

Introduction

EBay Incorporated was founded on 1995 with its head office located in California. eBay Inc. and its subsidiaries is an online business that provides its customer a marketplace for buying and selling goods, communication and other transaction between businesses located in USA and internationally. It is an online commerce that enables the two businesses to interact with one another. It provides fast transaction between individuals, and businesses.

Discussion

Ethical Consideration

There is an ethics in a company’s financial reports when it is communicated with other people, employees, stockholders, and creditors. We can say it is communicated when it is known by concerned people in the company. It makes people feel valued and important in the company. It helps them know the implication and may be able to help in the success of the business.

EBay’s financial reports footnotes show that there would be a loss on the reported profit if they accounted the employees a stock option plan in a fair value method. However, they did not provide this project. Considerably, the stock option plan provides the employees a chance to partly owned the company and be among the stockholders. It motivates the employees to work on their best in the company because it makes them cared a lot on the company. It also preserves those talented and deserving employees to stay in the company. Thus, it helps a lot in the company growth. With a loss of small amount in the profit, it can gain a lot more.

Financial Consideration

However, financial consideration is given to the stock option plan. The stockholder thought it would be best not to approve the proposed stock option plan of eBay. They observed that most of the employees are just sitting down. Also, they believe it will not benefit the company regarding with the return of the investment. Furthermore, stockholders consider that an excessive compensation to the employees may harm the return of stockholder’s equity. Stockholders fear that if they add value by giving employees the stock option plan, it dilutes the value of existing shares owned by the investors. Stockholders of eBay defend that they already giving compensation to the employees well and it is justifiable.

Meg Whitman Joins the Growing Trend

If Meg Whitman joins the growing trend of other companies in switching to the fair market value method of accounting for employee stock options, then she is making the right decision. Inflation is more possible to happen than deflation. Most of the companies experienced an increase in the value of money and other resources. Also, individuals happened to be affected on the inflation. Prices of commodities are increasing but the value of money stays the same.

The purchasing power of monetary value declined. Therefore, to meet the increasing needs, the income of an employee must increase as well. On the other hand, company needs to be updated on the value of their compensation on their employees. By using the fair value method, employees receive their salary and other compensation in an actual value or market price of their services to the company.

If eBay would not approve the proposals regarding the use of fair value in stock option plans for their employees, then they might experience a loss also. Employees would not be motivated to work on their best and attained their goals. The customers would experience low quality of services due to uninterested employees. This may result to the decrease of the company’s income. Worst, their employees might decide to transfer to another company. Thus, eBay might lose their talented staff that contributed greatly to the success of the company.

However, if they would not be approved using the fair value method, then the stockholders would benefit more on these. The value of their shares increases and would not be diluted. The profits might stay the same, providing the staff would not leave the company. If the profit is high, then the dividends that will receive by each stockholder are also high. Therefore, they would be the one who will become richer. They would be enjoying the great returns of their investment in the company.

If we will take a closer look on this, these investors, the stockholders are belonging to the higher society. They are rich enough to buy those stocks. To be fair, they invest in the company hoping to receive higher returns in their investments. In result, stockholders wanted to be richer than ever. They do not experience the real life faced by their employees.

Conclusion

Meg Whitman should change the accounting regarding the stock option plan for their employees. The company should feel that employees’ loyalty is of greater risk than the stock price. If the employees feel that they are not well compensated, then they would find another place in the other company. eBay must foresee what would happen if they would lose their talented employees. These employees have great contribution to the company. Without them, the company might experienced and prone to decrease of income. It is important that both the company and its employees are growing and achieving success.

References:

EBay Company Profile.(2009). Web.

Bradshaw, M. (2001). eBay,Inc:Stock Option Plans (A). Web.

Kopytoff, V. (2004). EBay Staff Sitting Pretty. Web.

Davis, J. (2009). eBay Seeks OK To Exchange Employees’ Underwater Options for Restricted Stock. Web.

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