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August 31, 2004
SEC Chief Wants Congress on Sidelines in Stock Options Debate

The head of the Securities and Exchange Commission is urging Congress to allow the Financial Accounting Standards Board (FASB) to decide whether companies must count the stock options they grant to employees as expenses, Reuters reports.

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William Donaldson, chairman of the commission, sent a letter to Congress after the House passed a measure that would override a FASB proposal.

The FASB has proposed that publicly traded companies be required to treat stock options granted to all employees as expenses. However, the House passed a measure in July that would require only the options granted to companies' top-five executives to be counted as expenses. The House measure would preempt the board's proposal.

In the letter, Donaldson argued that the legislation would undermine the board, Reuters reports.

"FASB's consideration of this proposed standard regarding stock options should be allowed to run its full course," Donaldson write.

Under current rules, no requirement exists for companies to count stock options against profits.

Proponents of the FASB proposal say it will act as a deterrent to accounting fraud that allowed some individuals to profit from their misdeeds. Opponents say that a mandate for expensing stock options would lead to fewer companies offering stock options as a benefit to employees. This, critics say, will make it harder for employers to attract and retain top employees.

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