FOR IMMEDIATE RELEASE
Tuesday, June 15, 2004
Sally Greenberg, 202-462-6262
(Washington, D.C.) – Describing it as a “sad day for investors,” Consumers Union expressed disappointment with today’s vote by the House Financial Services Committee to block a widely supported rule requiring companies to expense stock options so investors get the most accurate information about a company’s financial health.
“This is a sad day for investors and all those who value honest and transparent accounting,” said Sally Greenberg, CU senior counsel, of the House Financial Services Committee 45-13 vote to block a rule calling for expensing stock options. The committee’s vote supporting HR 3574, the Stock Option Accounting Reform Act, effectively stops a proposed rule by the Financial Accounting Standands Board (FASB) that would require all companies to list on their books stock options they give employees.
“This vote sends all the wrong signals,” Greenberg said. “We should be strongly backing more corporate accountability, not less. We should be insisting that investors get the best, most accurate information. This bill would mean less, not more, accuracy in accounting.”
CU joined Consumer Federation of America, US PIRG and Consumer Action in a letter to the House Financial Services Committee opposing HR 3574. CU noted that many eminent financial and accounting experts support FASB’s proposal, including the Big Four accounting firms, the Association for Investment Management Research, Warren Buffett, Paul Volcker, Arthur Levitt, Alan Greenspan and hundreds of companies that already voluntarily expense stock options.
“Congress should not block the recommendations of the board and financial experts who believe stock options are an expense that should have to be reflected in the financial statements of the public companies that issue them,” Greenberg said.
In the wake of the Enron and WorldCom accounting scandals, Congress recognized the need to protect FASB’s independence and passed the Sarbanes-Oxley Act, which gave the board a secure funding source and recognition as the accounting standard-setting body in return for the board enhancing the independence of its governance practices.
“Those reforms will have proven to be all but meaningless if less than two years after they were enacted, Congress reneges on its promise and subjects the independent, standard-setting process to political interference,” Greenberg said. “We ask House members to oppose this bill when it comes to the floor and send a signal to the nation’s investors that they support open accounting processes with stock options fully disclosed to investors.”