What's the point?

Few restaurant companies could match the financial performance of P.F. Chang’s in recent years, but last quarter provided the chance. The high-flyer’s profits were clipped by 9.4%. The culprit: $11.1 million in compensation expenses.

The drop was even steeper for arch-rival Applebee’s, another chronic over-achiever. Its first-quarter earnings tumbled 14.2%, in part because of compensation charges.

You’d expect the executives of those operations to be in a Dick Cheney tax bracket. But how about the leaders of Texas Roadhouse, a $459 million-a-year steakhouse challenger? Its first-quarter net was hammered down 9% by comp costs and an additional $1.6 million outlay for a managing-partners confab.

All three companies posted significant jumps in revenues—a 35% pole vault, in the case of Roadhouse. And their executives’ paychecks may not have been stuffed with any more doubloons than they were during the same quarter of the prior year.

What changed were the rules governing how a public concern accounts for executives’ stock-option grants. The regulations now require companies to calculate the value of the grants—in essence, a right to buy, not an outright monetary transfer—and reflect that dispersion upfront.

The objective was giving investors a truer picture of what executives are given in total from their employers, cash and non-cash. And the aim is laudable. If an executive is getting market-value pay, but two or three times the usual long-term incentives, shareholders should be aware of that generosity.

Yet the rules seem to be backfiring. P.F. Chang’s reliance on equity-based incentives is far more obvious under the new disclosure rules. Transparency is enhanced. But a 9.4% decline in earnings isn’t an accurate reflection of the powerhouse’s financial vitality. Its revenues rose 17.7%.

As that example shows, a noble effort has clearly been subverted. With any luck, the regulators will reconsider what they sought to do, and adjust backward to that worthwhile goal.