July 26
SUPPORT S. 2760, PRESERVE STOCK OPTIONS FOR
RANK-AND-FILE
Senators Enzi, Lieberman, and others, have filed a
bill, S. 2760, the "Stock Options Fairness and Accountability Act,"
which would direct the SEC to study all of the issues involved with
stock options and make recommendations. Following are reasons to
support this bill.
The Enzi-Lieberman bill prevents a rush to judgment
that would kill stock options. The "Stock Options Fairness and
Accountability Act" (S. 2760) filed by Senators Enzi, Lieberman,
Allen, Boxer, Burns. Frist, Feinstein and Ensign, would direct the
SEC to conduct a thorough study not only of the accounting issues,
but also other public policy issues in the stock options debate,
such as whether the valuation models work, the impact expensing will
have on the availability of options to both rank-and-file workers
and senior executive and whether investors would be better served by
having enhanced disclosures of the details of a firm’s stock options
plans. The SEC has the authority, expertise and credibility to
conduct such an expanded study. The Enzi-Lieberman bill provides a
more reasonable and appropriate vehicle for resolution of the stock
option accounting debate.
Vote "No" on amendments offered by Senators McCain
and Levin.
Senators Levin and McCain have indicated that they
intend to offer stock options amendments to any and every available
legislative vehicle. Senator McCain’s proposed amendment would
require that companies treat stock options as an expense for
financial reporting purposes. Senator Levin’s proposed amendment
would require that the Financial Accounting Standards Board (FASB)
study the issue and enact an appropriate standard within 12-months.
These proposals will end stock options for rank-and-file workers and
preserve them for senior executives.
- Senator McCain’s amendment would directly legislate an
accounting standard
. Congress should not get involved in the
business of setting accounting standards. Fed Chairman Alan
Greenspan told the Senate Banking Committee that Congress should
do nothing on stock options. There is broad disagreement over
whether expensing of stock options is appropriate. Many experts
believe that expensing stock options would only mislead investors
and give them an inaccurate picture of a firm’s financial
position. Just because options might be a form of compensation
does not mean that they ought to be expensed like other forms of
compensation.
- Senator Levin’s Amendment would direct the FASB to study
the appropriateness of expensing stock options only from an
accounting standpoint. There is more to the stock options
accounting debate than just the technical accounting theory.
Before any final decision is made on expensing stock options,
there should be a study of issues that is more thorough than
Senator Levin proposes; nor should FASB be compelled to study
issues outside its competence. Congress recently enacted
legislation purporting to make FASB independent. It would be
ironic indeed for the next bill to tell FASB what to do and when
to do it.
This page was last updated on 07/29/02.
Copyright © 2001 American Electronics Association.
All rights reserved. |