re: Tech Lobbies
All the bag fulls of money descending on Washington are in favor of keeping the current, misleading accounting going. As far as I know, there are no bag fulls of money descending on Washington fighting for expensing of stock options on the income statement. The pro options expensing crowd is only supported by the compelling logic of their arguments (imo), which are holding up remarkably well under the current onslaught from the money men of Silicon Valley. I am crossing my fingers that the Congress can show some character this time and does not succumb to campaign contributions.
In 1994, the independent FASB backed down from their decision to require expensing of stock options on the income statement under threat of having the FASB eviscerated by the Congress; the decision had absolutely nothing to do with anyone at the FASB believing in the merits of the arguments favoring keeping stock option expense hidden from the income statements.
Here is a statement from Arthur Levitt, former SEC Chairman about that period. Arthur Levitt's biggest regret from his entire career as Chairman of the SEC is that he backed down in the fight to expense stock options on the income statement. He was afraid that if he and the FASB fought on, the FASB would be gutted. This entire Frontline PBS interview with Arthur Levitt is a good read:
pbs.org
Snip: The Senate passed a [resolution] about the proposal of the standard setter to expense stock options. Why did they do it? There was no question in my mind that campaign contributions played the determinative role in that Senate activity. Corporate America waged the most aggressive lobbying campaign I think that they had ever put together on behalf of this issue. And the Congress was responsive to that.
And last year, in Congressional testimony before the Committee on Banking, Housing and Urban Affairs, Dennis R. Beresford, who was the FASB Chairman at the time Statemen 123 was issued, shared his views about that Statement and the reasons for the Board’ decision:
As many of you may recall, the FASB had proposed
that companies account for the expense represented by the
fair value of stock options granted to officers and
employees. The business community and accounting firms
strongly opposed this proposal and a number of
corporations engaged in a lobbying effort to stymie the
FASB’s initiative.
Certain members of Congress were sufficiently
influenced by the appeals from corporate executives that
they were persuaded to introduce legislation to counter the
FASB’s proposal. The legislation would have prohibited
public companies from following any final FASB rule on
this matter. More importantly, the legislation would have
imposed requirements that the SEC repeat the FASB’s
process on any new accounting proposals, effectively
eviscerating the FASB. Faced with the strong possibility
that its purpose would have been eliminated by this
legislation, the FASB made a strategic decision to require
companies to disclose the effect of stock options in a
footnote to the financial statements but not record the
expense in the income statement.
fasb.org
And some more history for the stock option expense issue for anyone interested:
#reply-17249383
Regards, Huey |
