It makes sense, setting aside the challenge of calculating their cost, to include equity awards in the budget, but few law departments do so. So, when I learned of a major law department that does include the costs, I realized I had stumbled upon yet another variable treated differently by law departments when they calculate their total legal spending.
Most departments exclude from their expenses the non-cash costs of equity incentive awards, but with Black-Scholes and other methods of determining the cost, it would be better to allocate those amounts to the total legal expenditure.
As I have often written, the fairest and most useful picture of total legal spending includes all law-related outlays. [See my posts of May 7, 2005 (internal litigation costs), May 30, 2005 (settlements and judgments), May 4, 2005 (TLS declining with company size.)]