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Monday, July 15, 2002

Applause for Coke

by: Tony Pennino

Over the weekend, Coca-Cola (NYSE: KO) announced that it would expense stock options it offers employees on its income statements. Citizens Funds, a socially-responsible fund located in New Hampshire, applauded the soda-maker's move. Coke will begin the change in its accounting practices at the start of the fourth quarter.

"It took guts for a giant such as Coca-Cola to announce that it will begin expensing options," stated Val Dingle, vice president of marketing at the firm. "It's high time investors got the full picture in terms of how overall performance is calculated -- there are a lot of hidden costs. Other companies may balk at expensing options, but as investors ourselves, we're applauding the move and hope that others follow suit."

An article in today's edition of USA Toady suggests that other companies such as Gillette could follow Coke's move.

Coke's decision is an excellent opportunity for mutual fund firms. They should take the opportunity as Citizens has to applaud the company's move and to encourage others to follow suit. In a conversation with the MutualFundWire.com, Dan Sondhelm, vice president at the media relations firm SunStar, stated, ""Right now, it seems to investors that mutual fund executives are hiding. This is not an appropriate strategy at all. They should be out there getting their message across."

The move to expense options is a strong piece of positive news. If, as USA Today contends, more companies will follow Coke's lead, then the news is even better. It is a step in helping investors regain some of their confidence. Mutual fund firms should be out praising Coke's decision and encouraging other companies as well. Such positive reinforcement might create a snowball effect in mutual funds' favor.

Last week was not a good one for stock market or mutual funds in general. With scandal after scandal hitting the front pages of the newspapers, the bears were running wild while the bulls remained penned up. The atmosphere fed rumors that Janus was selling stocks to meet shareholders' redemptions.

But encouraging corporate transparency, mutual fund firms can start to reverse this trend and regain some of that lost confidence. But, as Sondhelm opines, they have to get out there. They need to be seen communicating with their investors. By visibly and publicly acting on their shareholders' behalf, mutual fund firms can begin to decrease the level of emotionalism that is overwhelming the market right now. 

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