Senator Backs Tech on Stock Options
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The Securities and Exchange Commission (SEC) has again delayed the implementation of rules requiring the expensing of stock options. Sen. John Ensign (R-Nev.) thinks that's a good idea but doesn't go far enough.
He wants to eliminate the whole notion.
"I will continue to explore legislative options in an effort to preserve broad-based employee stock options," Ensign said in a statement.
Stock options are a popular form of compensation for tech-industry employees, but in the ugly backwash of accounting scandals at Enron and WorldCom, the Financial Accounting Standards Board (FASB) passed new rules requiring stock options to be counted against profits.
With SEC Chairman William Donaldson, Federal Reserve Chairman Alan Greenspan and billionaire investor Warren Buffett all endorsing the idea, the Silicon Valley quickly found itself isolated in its opposition to the new rules.
The SEC first set a Dec. 15, 2004, deadline to put the new rules into effect, but delayed that by six months, setting a new June 1 deadline. Late Thursday afternoon, the SEC moved the date again to Jan. 1.
"Feedback from public companies, accounting firms and others indicated that implementing [the rules] in a period other than the first quarter of a fiscal year potentially could make compliance more complicated," Donald T. Nicolaisen, the SEC's chief accountant, said in a statement.
Congress, however, may ultimately decide the fate of the FASB rules.
Last July, the U.S. House of Representatives approved the Stock Option Accounting Reform Act, mandating the expensing of stock options granted to the CEO and the next four most highly compensated officers of a company.
The House exempted expensing the stock options for all other employees. The Senate did nothing to stop the FASB rules and the Stock Option Accounting Reform Act died.
Ensign, chairman of the Senate Subcommittee on Technology, Innovation and Competitiveness, hopes to stir his colleagues from their apparent indifference to the technology's pleas.
"At a time when we should be encouraging investment and economic stimulation, these FASB rules will instead create confusion and will slow economic growth," he said. "The ability of individual investors to accurately monitor the economic health of companies has been significantly hampered, and small businesses will be particularly impacted."
Rick White, president of the International Employee Stock Options Coalition (IESOC), issued a statement calling the FASB delay a "welcome and positive development and reflects the concern that all stakeholders in the financial reporting process have raised with the implementation date adopted by the FASB."
According to IESOC, 79 percent of all U.S. workers owning stock options earn less than $75,000 annually and 57 percent of all U.S. workers owning stock options earn less than $50,000 annually.
"Stock options are a vital tool that helps U.S. companies attract and retain bright workers, and discouraging their use will not aid the American economy against challenges from Europe, China and India," White said.