Joining the Chorus--Is the SEC Listening? Add another hero to my growing list of policymakers, industry leaders, and economics experts who are taking a stand against FASB's rush to require companies to expense stock options.
In his
letter to SEC Chairman Donaldson, Lawrence Lindsey has raised a clear warning about FASB's recommended (and complicated) formula for projecting option values. "If the rule were to be implemented as is and on the current timeline, the quality of the information available to the public regarding employee stock options would be inadequate and potentially misleading."
Former assistant for economic policy to President George W. Bush, Lindsey is certainly well qualified to point out the differences between good policy and "knee-jerk" rulemaking that may harm employees, limit innovation, and muddy the waters for investors.
If his perspective does not carry enough weight, Lindsey's point of view has been supported by a constellation of academics and accounting thought leaders including: University of Chicago professor Randall Kroszner, former member of the President's Council of Economic Advisors; Columbia University's Professor Charles Calomiris; and Dr. Kevin Hassett of the American Enterprise Institute.
We predicted that FASB's rules will result in companies eliminating their broad-based stock option plans. Unfortunately, we appear to be correct-a recent survey by the National Center for Employee Ownership has estimated that at least 40 percent of publicly held companies are reconsidering their broad-based stock option plans and nearly one third may discontinue plans within a few years.
As the deadline for SEC ruling draws near, this "chorus of concern" is getting louder. We hope for the sake of many that this siren song of caution is not falling upon deaf ears.
Monday March 14, 2005