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Limit on Expensing Options Vote in the House Ignores Shareholder Concerns
Limit on Expensing Options Vote in the House Ignores Shareholder Concerns
Published 07-22-04
Submitted by IRRC
Washington, D.C. - Shareholders who have supported expensing stock options as a means to improve the accuracy of financial reporting will need to shore up their lobbying efforts since the House of Representatives voted yesterday, by a large margin, 312 to 111, to approve curbs on expensing rules.
The bill will require expensing only those options granted to the top 5 officers in a company rather than the more stringent regulations proposed by the Financial Accounting Standards Board for subtracting the value of all stock options from company profits.
The Investor Responsibility Research Center (IRRC), a proxy research and voting services firm that tracks voting results on shareholder proposals, notes that strong support, more than 47 percent, was garnered on 69 proposals in that came to a vote in 2003. More than 100 of those proposals were originally submitted, but many companies negotiated their withdrawal by agreeing to begin taking a charge for the value of their stock options, including Sprint, Bear Stearns, and Genuine Parts."
"The House vote flies in the face of investor sentiment that clearly favors expensing of all stock options," said Carol Bowie, Director of IRRC's Governance Research Service. "It may also be worrisome to shareholders that accounting rules, which are supposed to be set by the independent Financial Accounting Standards Board, could be subject to political pressures."
Anticipating that expensing options was inevitable, the number of shareholder resolutions filed on the issue has dropped to just 49 in 2004. But the Center has observed continued strong support by shareholders, including many that received majority support. To see voting results on this and several other key issues, visit the IRRC's website, www.irrc.com.
For more than 30 years, IRRC has been the leading source of high quality, impartial information on corporate governance and social responsibility issues affecting investors and corporations worldwide. Today, IRRC provides research, software products and consulting services to nearly 500 clients including institutional investors, corporations, law firms and other organizations.
