Stock Option Accounting Reform Act
Passes House

July 20, 2004

WASHINGTON, DC- Congressman David Dreier (R-San Dimas), Chairman of the House Rules Committee, hailed the passage of legislation today that will help keep in place a key tool for economic growth and provide investors with better information about the financial health of the companies in which they are invested. The Stock Options Accounting Reform Act, H.R. 3574, was approved with overwhelming bipartisan support, 312-111.

“If high growth industries lose their flexibility to use broad-based stock options, we all lose,” Dreier said. “Stock options align the employee interest with the company interest, and that produces a motivated worker. No matter what area of technology you look at, you will find that the common thread to a company’s success has been employee stock options. Without that flexibility, we would lose a key motivator for would-be entrepreneurs and existing innovative companies to take risks and transform new ideas into industry. New industries create new jobs, higher wages, and increased standards of living.”

The legislation approved today will ensure that growing businesses can continue using stock options as a critical tool to encourage entrepreneurship, innovation, and growth by delaying regulations proposed by the Federal Accounting Standards Board (FASB). Specifically, it will also: require the immediate expensing of all stock options for a company’s top 5 executives; forbid the expensing of options given to the rest of a company’s employees until accountants can devise more accurate methods to measure their cost; exempt small businesses from the top five expensing requirement for three years after they go public; and, forbid the SEC to recognize any new expensing accounting standard until FASB devises a “tuning up” mechanism and the Departments of Labor and Commerce complete an economic impact study.

Dreier applauded the work of Financial Services Chairman Mike Oxley (R-OH) and Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises Chairman Richard Baker (R-LA) for their leadership on the issue. He also thanked Energy and Commerce Chairman Joe Barton (R-TX), as well as his California colleague Anna Eshoo (D-CA), for their work on the legislation. “Economic growth should be a bipartisan priority,” Dreier said. “Today’s vote makes clear that we can work together on the issues critical to the success of our economy and the future for all Americans.”