[Congressional Record Volume 140, Number 30 (Thursday, March 17, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 17, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                         ADDITIONAL STATEMENTS

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                    SENATE CONCURRENT RESOLUTION 34

 Mr. GORTON. Mr. President, I am speaking today on behalf of 
the hundreds of small, high-technology companies in Washington State 
and throughout the Nation which, through their innovative 
entrepreneurial activity, provide much needed jobs and economic 
opportunities to people in their local communities. Because of their 
positive impact on the economy of the Nation, and the important 
technological advances they produce, I am a strong supporter of these 
businesses.
  These companies have been successful due, in part, to their use of 
employee stock options. Many high-technology companies grant stock 
options to their employees in lieu of larger salaries. Stock options 
enable companies to recruit high-quality employees without having to 
offer the enormous salaries such employees deserve. Instead, companies 
are able to offer prospective employees the option to buy stock in the 
company at a set price in the future. It is startup firms that benefit 
the most from stock options. Stock options enable small firms to begin 
operations with significantly less cash than would otherwise be 
required.
  In April 1993, the Financial Accounting Standards Board [FASB] 
proposed a new rule requiring companies to determine the value of 
employee stock options using a complicated options-pricing model and to 
include this value as an expense on their income statement.
  The FASB proposal, by requiring companies to deduct the value of 
stock options from their reported earnings, would cause a major 
reduction in reported earnings, diminishing the value of the companies' 
stock. This change could turn investors away from these companies.
  In effect, this proposed change in accounting rules could prove 
extremely harmful to the high technology industry. The many small high 
technology firms that use stock options will have the choice of 
continuing this policy at the real risk of losing investors or 
eliminating the practice of granting stock options at the risk of 
losing high quality employees. Either way, the FASB rule would create 
unwarranted havoc in this vitally important industry and have the net 
effect of dampening the local economies in which these firms are based.
  In my travels across Washington State, I have listened to the 
concerns of small businesses. These firms have told me that FASB's 
proposed change in accounting procedures will hurt their businesses. 
They have asked me to assist them in defeating the FASB proposal.
  In response to my constituents' concerns, I have decided to join my 
colleagues in cosponsoring Senate Concurrent Resolution 34, a 
resolution which asks the Financial Accounting Standards Board to 
reconsider its proposed change in accounting rules in light of its 
grave economic consequences. I trust that this sense of the Senate will 
encourage FASB officials to rethink their decision.
  Mr. President, the new accounting rule proposed by the Financial 
Accounting Standards Board has the potential to damage an important 
sector of our economy--a sector which should be encouraged, not 
hindered, in its expansion.

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