Reporting Choice and the 1992 Proxy Disclosure Rules

Disclosure rules adopted by the Securities Exchange Commission in 1992 allowed limited managerial discretion in reporting the value of stock options granted. I provide evidence that managers adopted valuation methodologies that reduced reported or perceived compensation and that also reduced potential accounting charges for stock options. I interpret this evidence as supporting the hypothesis that managers bear non-pecuniary costs from high reported levels of compensation-through increased political or shareholder pressure-and adopt reporting methodologies that reduce these costs