Dreier & Eshoo Introduce Stock Option Bill -- California Capitol Hill Bulletin - Volume 10, Bulletin 7 -- March 20, 2003

Reps. David Dreier (San Dimas) and Anna Eshoo (Atherton) introduced the "Broad-Based Stock Option Plan Transparency Act of 2003" on Thursday, March 20. The bill is intended to ensure that investors have accurate and meaningful information about a company's use of employee stock options, whether they are given to high level executives or lower level workers.

The bill directs the Securities and Exchange Commission (SEC) to require, by rule, enhanced reporting disclosures of all employee stock options given by publicly-traded companies. Additionally, the SEC would not be permitted to recognize any new accounting standard related to stock options until it has submitted a report to Congress on the effectiveness of the new disclosures, following a three year period of study. The bill would also require that the Secretary of Commerce study for one year the impact of broad-based employee stock option plans in expanding corporate ownership, recruiting skilled workers, stimulating research and innovation, and expanding the U.S. economy.

Recent efforts by the Financial Accounting Standards Board to require companies to account for stock options as an expense on their profit-loss statements has raised concern among California's information technology industry. They argue that stock options are a necessary component in their ability to recruit and retain highly-qualified employees during a company's early years. When used this way, they posit, stock options are offered to rank-and-file employees as often as they are offered to highly-paid executives.

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