The paper's aim is to investigate the stock option disclosures of directors and the five most highly remunerated officers in the directors' report of Australian companies for the years 2000 and 2002 and the choice to position these disclosures in the notes to the financial statements as opposed to the directors' report.
The study examines the compliance with mandatory disclosures for stock options for companies in the top 400 and also ascertains if there is consistent compliance across all required categories, including sensitive disclosures.
Although compliance is high for most of the required stock option disclosures, 43 of the 153 firms in the sample did not disclose the amount (value) of the options issued. Another 27 of the companies disclosed a “Nil” value for the value of options issued. Most of the companies disclosed the information in the directors' report, with larger companies and companies in the finance industry more likely to disclose in the notes to the financial statements, where the information is less visible.
The results indicate that companies were secretive about the most sensitive of the required disclosures, the amount (value) of the options issued. Regulators and researchers need to be cautious in conducting compliance studies as although companies appear to be transparent in their disclosures about stock options for directors, closer examination reveals secrecy about sensitive components of the required disclosures.
