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To: Didi who wrote (2019)	7/22/2002 5:19:08 PM
From: Didi	Respond to of 2505

FT: "SEC regulator cool on stock option changes" news.ft.com >>> SEC regulator cool on stock option changes By Adrian Michaels in Washington Published: July 21 2002 22:53 \| Last Updated: July 21 2002 22:53 A senior regulator at the US Securities and Exchange Commission has said reform of stock option accounting should be low on the list of priorities for reforms intended to restore investor confidence. Robert Herdman, the chief accountant at the SEC, is playing a critical role in efforts to shore up the integrity of financial reporting. His views, expressed in an interview with the Financial Times, are personal and not representative of the commission, but they clash with a growing movement in corporate America to placate investor concern that grants of options to executives are not properly reflected in company financial statements. Alan Greenspan, chairman of the Federal Reserve, and Warren Buffett, the influential billionaire investor, have expressed support for the expensing of stock options. Last week Coca-Cola said it would start to treat stock option costs as expenses, marking the first significant defection from the mass of US companies that prefer to record costs as a footnote. Mr Herdman said the SEC was focused instead on changes to rules covering the granting of options to company managers. "Stock options are a matter of corporate governance. We've advocated that shareholders approve all share options, that independent directors have to approve option grants and any moves to reprice them." This stance chimes with that of his boss, Harvey Pitt, SEC chairman. Last Friday Mr Pitt said: "If we start with the issue of expensing stock options instead of focusing on the issues of how we make them serve the public investor, we will take a simplistic solution to a complex problem." Mr Herdman said the Financial Accounting Standards Board, the US body charged with updating accounting rules, should be occupied with other projects such as special-purpose entities, the off-balance sheet vehicles at the heart of the Enron scandal. International standard-setters have started a debate over how to measure the value of options if they are to be treated as an expense. Mr Herdman, who joined the SEC from the accountancy firm Ernst & Young, pointed out that efforts in the US to reach a consensus on measurement had stalled before. "The argument was gone through in the mid-90s. The Financial Accounting Standards Board failed to come up with a method of measuring them. Right now FASB needs not to disrupt its attention," he said. "FASB's got its hands full. If it gets into stock options, everything else would go by the wayside." Former FASB officials say the earlier effort failed because of intense lobbying by the accountancy profession and business groups. Mr Herdman said that moving the accounting of stock options from the footnotes of financial statements "isn't going to change the behaviour of any company out there".<<< ========================= omaha.com >>>Published Thursday July 18, 2002 Accounting for stock options BLOOMBERG NEWS CHICAGO - More companies are saying they may heed Berkshire Hathaway Chairman Warren Buffett's call to account for stock options as an expense. Coca-Cola Co. and Washington Post Co., both of which count Buffett as their largest outside investor and a director, earlier this week said they will begin expensing options to make their income statements more accurate and clear. Bank One Corp. said Tuesday that it began the switch with second-quarter results, and General Motors Corp., Ford Motor Co., Darden Restaurants Inc. and Alberto-Culver Co. said they may follow suit. Calls by investors to record option costs have been spurred by accounting probes of companies including Enron Corp. and WorldCom. Stock options, which are designed as an incentive for employee performance, allow their owner to buy company shares at the price at which they were granted. Accounting rules require only an estimate of option costs in footnotes to income statements. Buffett last weekend said he hoped Coca-Cola's move would prompt other companies to change. "I have a lot of respect for Mr. Buffett," Alberto-Culver Chief Executive Officer Howard Bernick said. The company will review its options policy, Bernick said, and, "There will be conversations about this in our boardroom or other boardrooms as well." Advocates, including Federal Reserve Chairman Alan Greenspan, say omitting options from income statements obscures a transfer of wealth from shareholders to employees, understates costs and encourages executives to use improper accounting to boost the value of their options. Option awards soared in the 1990s and "perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising," Greenspan told the Senate Banking Committee Tuesday. Computer-related companies, including Microsoft Corp. and Oracle Corp., and trade groups such as the American Electronics Association oppose treating options as a compensation cost, saying that their value is unclear and expensing them would reduce profit and make it harder to attract workers.<<<