Telecom and copyright might be pretty much off the main Congressional agenda for the coming legislative session, but techs all-time favorite issue—stock option legislation—is looking better and better.
Although the Federal Accounting Standards Board said last week that it would implement a new policy requiring companies to treat options as expenses as of June 15, 2005, the game aint over. In fact, it might just be getting started. This time for real.
to read more about FASBs ruling on stock options.
FASBs decision, which was expected, isnt the last word. Tech can go back to Congress, and this time, many observers say, the computer and software industries may get their way. And quickly.
There are a bunch of reasons for this. Some are just part of the way Washington works; sometimes it takes a near miss—one or two votes short of approval—to win passage a year later. Also helping techs chances are the firmer Republican majorities in Congress following the November elections.
“We got halfway through this year,” says Rick White, CEO of TechNet, high techs lobbying arm which has been leading the charge on options reform. A bill that would require companies to expense only the stock grants made to top-level executives was passed by the U.S. House but died in the Senate.
White says TechNet can take its case to the Securities and Exchange Commission for review, but hes not optimistic that the commission—rife with political fighting on posturing over who can best protect investors from Wall Streets bad apples—will overrule the actions of the independent body it has charged with overseeing the accounting industry. So tech has to try its luck in Congress.
But where? Talk of easing the accounting requirements enacted in response to Wall Street scandals—the Sarbanes/Oxley act—has circulated pretty freely these past few weeks. Secretary of the Treasury John Snow told the Wall Street Journal that some reform of that measure might be in the works.
Thats unlikely says one securities lobbyist. “Republicans wont let themselves be accused of relieving companies of the responsibility of Sarbanes/Oxley, he says. Stock option relief for tech would be a natural fit, but its probably not going to happen here.
Helping small businesses
But if tech keeps making the case that option reform is vital to new start-ups, it may find itself front and center in the discussion about tax reform. That “help small business” strategy got the bill through the House earlier this year.
“I think the White House is more sensitive to the economic impact of stock options, says the securities lobbyist. That sensitivity could surface in a big way, particularly if the stock market keeps recovering while tech stocks continue to lag.
Stock option reform could be most easily folded into the sweeping tax reform package the White House has put front and center on its Congressional agenda. The argument here, which the Bush Administration has already started to make, is that tax reform is necessary to help smaller, independent business people. If President Bush starts talking—enthusiastically—about “entrepreneurs,” itll be a sign to look for stock option reform in this legislation.
If that doesnt happen—theres some talk tax reform will be pushed off to later in the year, perhaps not soon enough to undo FASBs rule-making—there are still a variety of venues.
Two other large bills, a “technical corrections” package to last years IRS reform, known as the “Jobs Act” and legislation authorizing spending on Iraq are also possible homes for stock option relief. Those would be sneaky back-room tricks, but they would push stock option reform past Republicans like Senate Banking Committee Chairman Richard Shelby (R-Ala.). He and others might not like stock option reform, but they wont want to vote against other, higher-profile measures because of the political consequences.
Oh, and theres a tradeoff here; dont think theres not.
TechNets White predicts that the industry will weigh in heavily on another cause close to its heart: tort reform. Techs going to help on that, clearly. Its a natural affinity. But its also good politics. “The message came to the tech guys that they were going to have to swing a stick,” and help legal reform pass.
Attempts to change ways in which class action lawsuits—think shareholder litigation—are conducted only failed by one vote in the Senate this year, White notes. So if tech does its part the measure may well pass, White predicts. “I think thats a fairly easy lift,” he says.
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