House Passes Curb On Expense Rules For Stock Options
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
July 21, 2004; Page C3
online.wsj.com
WASHINGTON -- The House, responding to lobbying by technology companies, overwhelmingly approved a bill that would limit the required "expensing" of stock options.
The bill overrides a proposal by a national accounting-standards panel that would have required companies to expense the value of all stock options. In their 312-111 vote, the lawmakers instead approved legislation to limit the expensing rule to options granted only to the top five officers of a company. The Financial Accounting Standards Board had proposed earlier this year that companies subtract the value of all employee stock compensation from company profits.
The House vote gives the tech lobby, led by Cisco Systems Inc. and Intel Corp., a significant victory over a weighty list of policy makers who argued against Congress intruding in standard-setting in the wake of major accounting-fraud scandals beginning with Enron Corp.
Among strong supporters of stock-option expensing as a means to improve the accuracy of financial statements are Federal Reserve chairman Alan Greenspan, Treasury Secretary John Snow, and Securities and Exchange Commission William Donaldson. Mr. Greenspan warned Congress earlier this year "it would be a bad mistake for the Congress to impede FASB," because the proposed accounting for stock options "strikes me as correct."
Still, the measure faces stiff opposition in the Senate. Even though a comparable bill is pending in the Senate with 25 co-sponsors, Richard Shelby (R., Ala.), who chairs the banking committee, has pledged to block any effort by Congress to meddle in rule-making by FASB, an independent accounting-standards body based in Norwalk, Conn.
Sen. Peter G. Fitzgerald (R.,Ill.), joined by Sens. John McCain (R,., Ariz.), Carl Levin (D., Mich.) and Richard Durbin (D.,Ill), introduced a resolution to protect FASB's independence and integrity under its assault by the House. But critics of the bill say they are worried that House leadership may attempt to short-circuit the process by inserting an amendment in a must-pass appropriations bill that would derail FASB's stock-options proposal.
In approving the measure, a bipartisan roster of members argued that the proposal would cause hits to earnings, particularly for small technology companies, and hurt start-up companies that depend on stock options as an important compensation tool to attract talent. The accounting rule would mostly penalize the rank-and-file employees of small companies who depend on company stock for an important part of their compensation, bill supporters said.
Write to Michael Schroeder at mike.schroeder@wsj.com |
