McCain Cosponsors Ending Double Standards for Stock Options Act. (Jorj, the "seasons are continuing to change' in front of our very eyes)
mccain.senate.gov
Washington, DC – U.S. Senator John McCain today made the following statement regarding the introduction of the Ending Double Standards for Stock Options Act:
"Mr. President. I rise today to introduce legislation with Senators Levin, Fitzgerald, and Durbin, entitled Ending Double Standards for Stock Options Act. This legislation requires companies to treat stock options for employees as an expense for bookkeeping purposes if they want to claim this expense as a deduction for tax purposes. We introduced similar legislation in 1997 during the 105th Congress but unfortunately, the special interests with a vested stake in the status quo prevented this legislation from seeing the light of day.
"Currently, corporations can hide these multimillion-dollar compensation plans from their stockholders or other investors because these plans are not counted as an expense when calculating company earnings. Even the Federal Accounting Standards Board [FASB] recognized that stock options should be treated as an expense for accounting purposes. Accounting disclosure rules issued by FASB require that companies include in their annual reports a footnote disclosing what the company's net earnings would have been if stock option plans were treated as an expense.
"The latest scandals involving the collapse of Enron highlight the problem of misleading annual statements and financial statements. According to a recent analysis, from 1996 to 2000, Enron issued nearly $600 million in stock options, collecting tax deductions which allowed the corporation to severely reduce their payment in taxes. Whether or not Enron took advantage of current disclosure rules to hide their financial problems remains a question. The fact remains that current rules allow companies such as Enron to disclose as little as possible. And this prevents investors, Wall Street analysts, corporate executives, and auditors from properly understanding the bottom line of corporations.
"One might reasonably ask how an arcane accounting rule could have such a large impact on the bottom line of corporations. The answer lies in the growth and value of stock options as a means of executive compensation.
"We have heard the reports of executives making multimillion-dollar salaries, while average worker salaries stagnate or fall. According to one recent report, almost half of the earnings of the typical chief executive officer of a top company reflects stock options. Why shouldn't the value of this compensation package be included in calculating a company's earnings? How can stockowners evaluate the true value of employee compensation if the value is just buried in a footnote somewhere in the annual report?
"No other type of compensation gets treated as an expense for tax purposes, without also being treated as an expense on the company books. This double standard is exactly the kind of inequitable corporate benefit that makes the American people irate and must be eliminated. If companies do not want to fully disclose on their books how much they are compensating their employees, then they should not be able to claim a tax benefit for it.
"This legislation does not require a particular accounting treatment; the accounting decision is left to the company. This legislation simply requires companies to treat stock options the same way for both accounting and tax purposes.
"I hope my colleagues will join us in cosponsoring this important legislation that will end the double standard for stock option compensation." |
