Stock Options 2004 Priorities

Stock Options - Accounting Issues

 What is the Issue?

• There is continuing pressure, much of it non-legislative, to require companies to expense the value of stock options.  Much of this pressure comes from the accounting standards setting bodies: the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB).

• The political furor against stock options is a result of the corporate scandals of 2001-2002.  The public has come to associate stock options with executive compensation, accounting fraud, and corporate greed.  This political backlash against corporate America has created an opening to require the expensing of stock options.

• FASB and IASB seem intent to meet their self-imposed deadline of requiring companies to expense the value of stock options granted starting on January 1, 2005 .

Why does this matter to AeA Member Companies?

• Most AeA companies issue stock options throughout their employee ranks.

•  If stock option expensing is mandated, there will be a significant hit on the company’s income statement and many AeA Member Companies will be unable to provide stock options to rank-and-file employees, the primary recipients of stock options.

• Rank-and-file workers of public high-tech companies are the recipients of the lion’s share of options with nearly 70% of options grants going to non-executives.

• For high-tech companies, stock options are a key tool to attract and retain the best workforce.

What is the desired outcome?                        

To prevent the expensing of stock options by either legislation or accounting standards issued by FASB.

What is AeA going to do with our Member Companies to ensure this outcome?

• Continue to be a leader in the International Employee Stock Option Coalition and the lead trade association opposing the expensing of stock options.

• Lobby Capitol Hill in support of legislation that will ensure the ability of high-tech employers to make stock options broadly available to their employees.   

• Host another executive fly-in this spring.

• Set up programs around the country in AeA Councils with SEC Commissioner Paul Atkins, who is the only opponent of expensing on the Commission.

• Continue to work to persuade the Accounting Standards Setting Bodies, both domestic and international, not to adopt rules requiring the expensing of stock options.

AeA Staff Contact

Marie Kalamaras Lee, Manager/Counsel, Tax Policy

202-682-4448, Marie_Lee@aeanet.org

This page was last updated on 02/17/04.  
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