Executives from dozens of technology firms gathered in Washington, D.C., on Tuesday in a last-ditch effort to save stock options from possible oblivion.
The American Electronics Association (AEA) organized the one-day lobbying effort, marked by about 35 meetings with U.S. Securities and Exchange Commission members, and key senators, to rally support for a bill that the group believes may be the last chance to maintain the popular practice of granting stock options to employees.
In March, the Financial Accounting Standards Board (FASB) voted to include the cost of stock options in corporate income statements. The Republican-dominated U.S. House of Representatives voted to overturn FASB's decision and largely preserve the current method of accounting for the cost of stock options.
But that legislation has stalled in the Senate. Tuesday's lobbying effort is designed pressure senators to approve the bill before the next Congress convenes in early 2005.
"What we're trying to do is get more co-sponsors," said John Palafoutas, AEA's senior vice president responsible for congressional affairs. "So we give (Sen. Michael Enzi, R-Wyo.) and our other champions more leverage in the end game in the Senate." Enzi is the primary sponsor of the Senate version of the House bill.
Among the companies sending executives to Capitol Hill: Sun Microsystems, Red Hat, Applied Films, TriQuint Semiconductor, Nanoventions, Cadence Design Systems, National Instruments, Lexar Media and Pixelworks. If FASB's proposal becomes final, many technology companies are expected to abandon grants of new stock options, because they will become too expensive to offer.
They're scheduled to meet with politicians, including senators Ron Wyden, D-Ore., Elizabeth Dole, R-N.C., Tom Daschle, D-S.D., Hillary Clinton, D-N.Y., Bill Frist, R-Tenn., and Richard Shelby, D-Ala.
Last week, the CFA Institute--which represents securities analysts and money managers--counterattacked with a letter urging Sen. Shelby to support FASB. The letter said "FASB supports reality over fantasy and the investor's right to know over management's right to hide...Financial statements exist, first and foremost, to allow investors to make well-informed decisions. They must not become a sales tool for management. They must represent a fair and accurate picture of the company as it is--not as management would like others to believe it is."
"The issue isn't options," Rebecca McEnally, CFA Institute's vice president of advocacy, said Tuesday. "The issue is the expensing of options. (The political) debate has been an attempt to deflect the issue from the real economic substance here. It's not the options. It's providing the information on the options in the financial statement."