Thank you, Mr. Chairman, for allowing me to testify at this hearing today.

 I have worked for years with Senator Enzi, Senator Ensign, Senator Lieberman, Senator Allen, and others to ensure that our colleagues are aware of the benefits for workers and our economy of broad-based stock option plans. 

 In June 2002, the Women’s High Tech Coalition wrote to me to share their experience of what stock options have meant to women in the tech industry.  I invited them to Washington to share those stories with our colleagues.

 As a result of my work with them and discussions with workers all over California, I passionately believe that broad-based stock option programs are good for workers.

 But, as you all know, the Financial Accounting Standards Board (FASB) has published a proposal to force companies to expense stock options, and the rule will be implemented early next year if we do nothing. 

 FASB continues to ignore the consequences this decision will have on rank and file employees, on our innovative technology sector, and on our economy as a whole. 

Here is a sample of what my constituents are saying:
• Bill Griffin, who works for Autodesk in Palo Alto, wrote to the FASB, “Stock options are the last bastion of the hard working middle manager.  For two years, the only thing that has helped me pay for two kids in college has been stock options.  Without stock options, mortgaging my home would have been my only option.”

• David Dorr, from San Jose, wrote to the FASB, “ In my opinion, stock option compensation at Silicon Valley companies is what helped form this valley in the first place.  Don’t destroy it because some companies abused it by only giving options to their top executives.”

• And listen to what Kelly Simmons wrote to the FASB, “If you eliminate broad based employee stock options from hard working individual contributors like me, you are taking away more than you think.  You are taking away the dream of someday owning a home here in the Silicon Valley.”

 FASB received many letters just like these.  But the FASB has made clear that it will not consider the economic consequences of its decisions. 

 That is why Congress must step in.  Accountants are important and I have a great deal of respect for them.  But in this case, they have blinders on – blinders that seemingly make it impossible for them to see the real impact of their rules change.

 Let’s be clear – the mandatory expensing of stock options will have the practical effect of harming – perhaps fatally – any start-up company or business plan that currently offers stock-options company wide. 
 
 As an alternative to the FASB approach, Senator Ensign and I have worked with Senators Enzi and Reid and others on legislation that would mandate the expensing of stock options for the top 5 executives at a company, but not for options granted to rank and file workers.  Start-up companies would also be exempt from this bill.   

 In addition, the bill would require a full assessment of the costs and benefits of the expensing of all stock options before the SEC could enforce any new FASB rule on stock options. 

 Our bill recognizes that stock options play an important role in encouraging entrepreneurs to take the risk of starting up new, innovative firms.  It allows companies to share the wealth they create with their workers.  And, it sends a clear message that FASB must be fair.

 Requiring the expensing of all stock options will not prevent high-profile corporate scandals.  All it will do is result in rank and file workers losing their stock options.

 We have a strong, bipartisan group of Senators supporting this bill and I urge the Senate to pass it as an alternative to the draconian solution FASB proposes.