Providing for Consideration of H.R. 3574, Stock Option Accounting Reform Act

PROVIDING FOR CONSIDERATION OF H.R. 3574, STOCK OPTION ACCOUNTING REFORM ACT -- (House of Representatives - July 20, 2004)

Mr. SESSIONS. Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 725 and ask for its immediate consideration.

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Ms. ESHOO. Mr. Speaker, I thank the gentleman from Florida (Mr. Hastings), my good friend and classmate, for yielding me this time.

I am very proud to be the Democratic lead sponsor of the Stock Option Accounting Reform Act, and I want to thank the gentleman from California (Chairman Dreier) for his partnership and his hard work, and the gentleman from Louisiana (Chairman Baker), as well as colleagues from both sides of the aisle for the work that they have done to bring this issue forward so that we can take this up on the floor of the House today.

The Financial Accounting Standards Board, FASB, has sought for years to force public companies to expense stock options from their earnings, and Congress has consistently turned away these efforts. This is not the first time. I hope it will be the last time, but it is not the first time.

Now, the board has seized on the recent corporate scandals to push this controversial proposal through. But supporters of the FASB rule, including FASB itself, are unable to identify a single instance where the accounting treatment of broad-based stock option plans for rank-and-file employees has contributed to corporate misconduct or shareholder fraud. Stock options are already fully disclosed in corporate financial treatments. They are not, however, deducted from earnings.

The reason most companies reject the expensing of stock options is that their actual cost is highly speculative and extremely difficult to measure. Options have a direct impact on the dilution of shareholder value, but the actual cost to the company is uncertain. Furthermore, valuation of employee options is highly inaccurate, and FASB has yet to come up with an acceptable means for estimating their value.

That is why this legislation is needed. It is needed to prevent FASB's new rules from taking effect later this year, causing substantial disarray in corporate accounting. Implementation of these new accounting rules would have a disastrous impact on American companies and, most importantly, American workers. If companies are forced to expense stock options, most likely they will drop broad-based stock option plans because of the prospect of taking a huge and misleading charge against their bottom line.

So while corporate executives will undoubtedly continue to receive lucrative compensation, rank-and-file employees will lose the benefits of these employee ownership programs.

Congress, I believe, has the responsibility to ensure that a major change in corporate accounting is appropriate and that it is implemented prudently. Why? Because impacts on our national economy are the business of the Congress. We would not have stepped in before, and I would not be offering this legislation were this not the case. FASB has acknowledged that to us, that they are in charge of accounting rules; but they do not take into consideration the economic impacts.

So I urge my colleagues to look at this carefully. There are many, many complications to this. More than anything else, this is not for corporate executives. This is for rank-and-file employees who take a risk in start-up companies and say that when the risk is realized in a positive way that everyone wins. Let us protect that, especially at a time where our national economy needs to protect something that we know works.