US senator warns lawmakers against options bill
By Susan Cornwell
WASHINGTON, June 2 (Reuters) - A key U.S. senator warned on
Monday that a House bill that would curb planned new stock
option rules might well run into trouble when it reached the
Senate.
Senate Banking Committee Chairman Richard Shelby urged
members of the House of Representatives not to interfere with
the options plan by the Financial Accounting Standards Board,
or FASB, a day before a congressional committee was expected to
approve a bill doing just that.
The House Financial Services Committee was scheduled to
take up the bill by Louisiana Republican Rep. Richard Baker on
Thursday, with the expectation that lawmakers will vote it out
to the House floor.
The FASB is proposing a rule requiring public companies to
count stock options as a routine business expense. The House
measure would curb that rule.
"Obviously there is some sentiment to override FASB,"
Shelby, an Alabama Republican, told reporters in a Senate
hallway. "There's not a lot (of this sentiment) over here in
the Senate, in the Banking Committee.
"I certainly am against that," Shelby said, adding that the
ranking Democrat on his committee, Maryland's Paul Sarbanes,
also opposed limiting FASB's ability to act.
Members of FASB are the experts and should be left to do
their job, Shelby said. "I believe we should not go back to the
old ways, look what happened when Congress got involved before.
Let's don't go down that track."
FASB considered requiring options expensing before, but
backed away in 1994 under Senate and industry pressure.
FASB is expected to finalize its options rule later this
year, but the effort has been fraught with controversy.
Congress has come under pressure to stop the effort from
lobbyists from high-tech companies that have relied heavily on
the use of options as compensation.
But supporters of FASB's plans say that expensing options
would close an accounting loophole that contributed to recent
corporate book-cooking scandals.
Without Shelby's support, Baker's bill has an uncertain
future in the Senate. But if they cannot get a similar proposal
out of the banking committee, supporters could still try to
append it to another measure on the Senate floor.
Stock options are the right to buy or sell stock for a set
price at a future date. Baker's bill, which has broad
bipartisan support, would limit required expensing of options
only to those granted to a company's top five officers.
It would also defer enforcement of any FASB expensing rule
until the U.S. Securities and Exchange Commission conducts a
study on its economic impact.
((Reporting by Susan Cornwell, editing by Michael Miller;
Reuters Messaging: susan.cornwell.reuters.com@reuters.net;
email: susan.cornwell@reuters.com; Tel: +1 202 898 8391))
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