Bill Would Require Option Expensing, But Only for Top Execs
A bipartisan group of senators is pushing legislation that would require only the top five executives at a company to expense their stock options.
Sponsors of the bill say it is a compromise they hope will persuade the Financial Accounting Standards Board (FASB) to drop its plan to require companies to list all options as expenses, Reuters reported.
Wyoming Republican Sen. Mike Enzi, one of the bill’s five sponsors, said FASB is not listening to protests from lawmakers, business people and others that requiring expensing of broad-based options programs could hurt U.S. companies and the economy.
"Independence, like freedom, has to be earned," Enzi said of FASB, adding that if the rule-making board listens to the senators, "they may not have to worry about this bill."
Small business owners are opposed to expensing stock options for all employees, saying it would do more harm than good. A stock option is the right to buy or sell stock for a set price at a future date.
During recent corporate scandals, many critics blamed stock options for inflating corporate earnings since executives would be tempted to pump up stock prices by any means.
FASB spokeswoman Sheri Thompson said the legislation would create an uneven playing field, where only certain stock-based pay is expensed. "Investors deserve and demand greater transparency in financial statements," she said. FASB hopes to issue a proposed rule on expensing stock options early next year.
The Senate bill's backers said they're optimistic it will gain favor early next year when Congress returns to Washington after the winter recess. The bill would exclude small businesses, and start-up companies, from the top five requirement.