The Atlanta Journal-Constitution reports that the companies have allies on Capitol Hill, including Sen. Barbara Boxer, D-Calif., who has said a bipartisan group of senators is mapping out a strategy to prevent board action.

Giving stock options means "giving people a piece of the dream," Boxer said. "We can't stand by and let accountants wearing green eyeshades decide who is going to get the American Dream."

Those who oppose counting options as expenses say it would greatly discourage companies from using that form of compensation.

An option gives the holder the right to buy or sell stock, at a specified price, by a specific date. As the AJR notes, option holders can make huge profits if they're allowed to buy shares at low prices and the value of the shares rise later.

During the 1990s, options became wildly popular, especially with young companies that could not afford big salaries. But in 1993, the accounting board, a private group that sets industry standards, considered rewriting the rules for options. The board believed that an option grant should be counted as an expense, just as paying a salary to a worker counts as an expense that lowers earnings.

It also believed such a change would give shareholders a more honest picture of a company's finances.

Executives, however, feared that it would discourage option grants. To block the FASB, a coalition of lawmakers, led by Sen. Joe Lieberman, D-Conn., threatened to strip the board of its standard-setting power. The board backed down, though many reformers complained bitterly that Congress should not have injected itself into the accounting profession's decision-making process.

In late 2001, the options debate flared up again when Enron Corp. plunged into bankruptcy. Many Enron critics said the desire to cash in stock options drove Enron executives to inflate earnings. Throughout 2002, as more and more accounting scandals erupted, reformers again called for the expensing of stock options.

The FASB's new chairman, Robert Herz, told a House Energy and Commerce subcommittee this week that he would push for options expensing.

"We are in the change business," Herz said. "We are going to do what we think is right," regardless of political pressure.

Herz is one of seven board members. They have not yet spelled out when or how they might act.

Links

• Atlanta Journal-Constitution article