Skip to content

Washington, D.C. – The Financial Accounting Standards Board (FASB) should take into account the economic impact to the American worker as it considers accounting standard changes on the expensing of stock options, according to U.S. Senator Mike Enzi, R-Wyo.

Enzi, who chairs the Senate Banking Subcommittee on Securities and Investment, assembled a "brain trust" of prominent business people and financial experts to discuss stock option expensing yesterday. Sens. George Allen, R-Va., and Barbara Boxer, D-Calif., also helped Enzi organize the roundtable.

Enzi told FASB he had defended the board's independence, but is disappointed the board seems to have made up its mind to expense stock options before it listened to all the evidence. Enzi hoped FASB, whose chairman Bob Herz participated in the roundtable, would consider the arguments presented at the discussion. However, judging from comments made during the discussion by Herz, Enzi said he was concerned about FASB's objectivity more than he was before the roundtable began.

Below are Enzi's opening remarks and a list of roundtable participants.


Opening Statement
of Michael B. Enzi
for the Roundtable Discussion
Preserving Partnership Capitalism Through
Stock Options for America’s Workforce



Good afternoon and welcome to today’s Roundtable Discussion. I appreciate your taking the time to join us for an examination of the future of employee stock options.

I am pleased to be joined by Senator George Allen and Senator Barbara Boxer. We have worked side by side for several years now in an effort to preserve stock options for America’s workforce. They have both been tireless in their efforts to address the needs of their state’s workforce and they deserve a great deal of credit for their leadership on this issue.

As we consider this issue and the decision of the FASB on stock options, we are fortunate to have the benefit of the expertise of those who are here today to offer their insights on this important issue. Fortunately, we have people who represent virtually every side of this issue – management and labor, the accountants who keep the books, those who focus on and study the business community, and those who teach the principles of business management and philosophy in our nation’s schools. We thank all of you for coming and we look forward to taking your comments as we take a closer look at this matter.

As an accountant and now as a member of the Senate, I have found that the best way to study any decision is to examine the process that produced it. Each federal agency, and every decision making body of this government has its own methodology to study and solve problems and each has its own benefits and consequences.

Here in Congress, for example, we usually examine a problem and then work together in an effort to find a workable solution for it. As we all know, how you approach a problem has a great effect on the solution you eventually find to it.

Again, in the Congress, when we tackle a problem, each body uses the skills and talents of its members to help craft a solution. Then both sides go to a conference where we work out the differences between the two solutions. Inevitably, during the process the problem has dramatically changed – or the solution. That leads to some last minute alterations and changes as it makes its way through each step of the process. Although it may sound chaotic, that is what makes our form of government work. We have 435 voting members of the House and 100 Senators – people who come from different backgrounds with different ideas about how to “fix” things. Each member brings his or her own skills and adds them to the mix. The process can become pretty complicated – some might say chaotic – but it remains a lot more democratic in many regards then most regulatory processes or the process for setting accounting standards.

The FASB’s approach, which began by assuming there was a problem, may, in the end, produce a solution that may or may not be workable or necessary. I am a staunch supporter and defender of the FASB’s independence and its work on policy issues. My concern has to do with its development of the principles of accounting for our nation’s businesses which I believe is best left to those with hands on experience in the field.

That will be another issue that will be part of today’s discussion. As we take these matters up, we are very grateful that Bob Herz and Michael Crooch are here to help us examine these issues and their implications.

Last summer I fended off attempts by several members that would have legislated the granting of an option as an expense. On May 4, 1994, the Senate had voted 88-9 to interfere with the FASB process and attempt to legislate a solution. A lot of those who voted to take that action have had second thoughts and now it seems we are all inclined to take another look at it. That kind of review is an important part of a legislative process that is ongoing and that continues to examine the impact and effects of the laws we make. That is the “good news” of our current dilemma. The “bad news” is that this is going to take a lot of work. There’s no way we can take our solution – whatever it may be – and put it neatly into a little amendment that everyone will vote for and that will ultimately solve the problem.

Right now, as we meet, some 200 public companies have made it clear that they intend to expense. That’s not a very big number, given the approximately 15,000 public companies in the United States, but still it’s a decent sample that will give us some needed information about the process the FASB would put into practice. I would hope that the FASB would take the time to detail the valuation methods those companies have chosen to employ, as well as management and investor satisfaction with those methods and take that valuable data into account in their decision making. I have done a lot of reading over the past year and I have seen quite a few studies that assess the shortcomings of the Black-Scholes formula. I am convinced that we have to get away from that formula and do all the heavy lifting necessary to ensure that we get it right the first time.

In the end, however, this discussion and the entire question before the Senate can best be expressed in terms of our concern about the employees of this nation. Anything we do will have to be examined in the light of its impact on the working people of this country. Any solution that does not protect the working people of our country from becoming entangled in a maze of rules and regulations will be unacceptable. Also, big businesses grew from small businesses. Options have been a primary tool for attracting talent to a firm with little cash. We do not want a solution at the expense of small business.

Thank you again for being a part of this important discussion of an issue that may have a profound impact on the future of our nation’s workforce. Your willingness to share your insights and the experience you have gained from your careers is greatly appreciated and valued. I look forward to hearing your comments, suggestions and insights on stock options.

--------------------

Those attending yesterday afternoon’s roundtable included: Sens. Mike Enzi, R-Wyo., George Allen, R-Va., Barbara Boxer, D-Calif., Maria Cantwell, D-Wash., Dr. Rory Knight, President of Oxford Metrica and the European Employee Stock Options Coalition; Dan Crowley, Vice President and Managing Director of NASDAQ; James Barksdale, The Barksdale Group; Sandra Wijnberg, CFO of Marsh and McLennan; Joseph Blasi and Doug Kruse, authors of In the Company of Owners; The Truth about Stock Options (and why every employee should have them); Dennis Powell, Senior Vice President for Finance of Cisco Systems, Inc.; Dr. William Sahlman of the Harvard Business School; James R. Haddad Chairman of Association for Financial Professionals Financial Accounting and Investor Relations Task Force; John L. Doerr of Kleiner, Perkins, Caufield and Byers; Colleen A. Sayther, President of Financial Executives International and Andy Bryant, Executive Vice President and Chief Financial and Enterprise Services Officer for Intel Corporation.

-end-