[Congressional Record Volume 140, Number 51 (Tuesday, May 3, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONSUMER REPORTING REFORM ACT OF 1994

  The Senate continued with the consideration of the bill.
  Mr. RIEGLE. Mr. President, if it is agreeable to my colleagues, the 
managers of the bill, I will make my own statement about the 
legislation at this point.
  Mr. BRYAN. We would be delighted to have the distinguished chairman, 
and I would like to acknowledge him and thank him again, as did Senator 
Bond, for his leadership and support for bringing this measure forward.
  Mr. RIEGLE. I thank the Senator from Nevada. I want to commend and 
compliment the Senators from Nevada and Missouri for their bipartisan 
effort on this legislation.
  I am pleased that the Senate is considering S. 783, the Consumer 
Reporting Reform Act of 1994. This is one of the most important pieces 
of consumer legislation that this Senate will consider this Congress, 
and I urge its swift passage.
  The bill contains a comprehensive package of amendments designed to 
modernize the Fair Credit Reporting Act. I am proud to have been an 
original cosponsor of this legislation with Senators Bryan and Bond. 
And I want to again commend them for their important leadership in this 
area.
  Together with Senators D'Amato and others on the Banking Committee, 
we worked on a bipartisan basis to craft this important legislation. 
The committee reported the bill out favorably by a vote of 15 to 4, a 
strong bipartisan basis of support.
  The Fair Credit Reporting Act was enacted in 1970 to regulate the 
credit reporting industry. The act has been amended only once since its 
passage, and is now I must say badly outdated. Since 1970, credit 
reporting has grown into a multibillion-dollar industry affecting each 
and every consumer in the country. Credit bureaus now maintain 450 
million credit files on individual consumers, and they process almost 2 
billion pieces of data each month.
  As the industry has grown, the number of problems associated with 
consumer reports has also escalated. From 1990 to 1993, the Federal 
Trade Commission received more complaints regarding credit reporting 
than any other industry. Evidence presented before the Banking 
Committee indicates that all too many consumers have been denied 
credit, housing, and even employment due to errors in their credit 
reports.
  In short, the Fair Credit Reporting Act is sorely in need of 
modernization. This legislation takes vital steps to ensure that credit 
reports are accurate, that mistakes are identified and corrected, and 
that the privacy of the information contained in those reports is 
protected, as it should be.
  There are several aspects of S. 783 that represent clear improvements 
over the current law. The bill seeks to safeguard the privacy of 
information contained in a consumer's credit file. It requires users of 
consumer report information to identify a permissible purpose under the 
law to acquire a report and to in turn certify that purpose. Likewise, 
the bill provides consumers with an affirmative right to opt out and 
ensure that the information in their credit files is not used for 
direct marketing.
  The bill also seeks to ensure accuracy in consumer reporting. It 
increases the ability of consumers to identify problems by providing 
them with an actual copy of their report rather than the summary 
allowed under current law. When mistakes are identified, the bill 
requires credit bureaus to develop and update disputed information 
within 30 days. For the first time, the bill will apply the Fair Credit 
Reporting Act to creditors who provide the information contained in 
credit reports.
  Under current law, those furnishing information to credit bureaus are 
not covered by the act leaving a consumer helpless when a creditor 
mistakenly places adverse information in his or her credit file. S. 783 
requires creditors furnishing information to do so accurately, and 
moreover to investigate disputes promptly.
  Finally, S. 783 provides protections against abuses by credit repair 
organizations. As consumers have experienced problems with credit 
bureaus, a new industry has emerged offering to assist consumers in 
cleaning up their credit files. Too often however the representations 
of these so-called ``credit doctors'' prove misleading, deceiving 
consumers into paying higher fees or causing credit bureaus to waste 
time and money on spurious disputes. The bill provides several 
protections, including prohibiting credit repair organizations from 
collecting fees until their services have been fully performed.
  We worked on a bipartisan basis in the Banking Committee in drafting 
and reporting this legislation. The product of this effort is a bill 
that has broad support from both industry and consumer advocates.
  In particular, I want to place in the Record a copy of a letter that 
I received from the Associated Credit Bureaus, a trade association 
representing over 700 credit bureaus nationwide. The letter expresses 
the association's unqualified support for S. 783, and the managers' 
amendment. I want to thank them for the letter. I ask unanimous consent 
that it be printed in the Record at the conclusion of my remarks.
  The PRESIDING OFFICER (Mrs. Murray). Without objection, it is so 
ordered.
  (See exhibit 1.)
  Mr. RIEGLE. I also want to express my full support for the bipartisan 
managers' amendment developed with Senators Bond and Bryan. This 
amendment improves the bill in several areas. In the area of liability, 
it ensures that providers of information are not held to a perfection 
standard, shielding them from private causes of action for initially 
furnishing inaccurate information to credit bureaus.
  At the same time, the amendment clarifies that private remedies are 
available if the provider of the information fails to properly address 
a mistake once the issue has been raised. At the same time, it provides 
a 5-year sunset on the provisions of the bill and preempts State law. I 
believe this sunset reflects a reasonable compromise between the need 
for uniformity and the maintenance of effective consumer protection and 
credit reporting. At the same time, I urge my colleagues to join in 
opposing any efforts to further preempt state credit reporting 
statutes. Credit reporting is an area of swift technological change. I 
think we have to be careful not to infringe upon the rights of States 
to respond and properly protect their citizens. The managers' amendment 
substantially improves the legislation. I support it and support its 
adoption.
  Let me conclude by saying that Senator Bryan of Nevada and Senator 
Bond of Missouri have given great effort and leadership on a bipartisan 
basis to this important area of legislative focus that brings us here 
today. I thank them for that work. This is an area that touches 
virtually every person in the country. These are important advances and 
reforms and safeguards. I have appreciated their work as chairman, and 
I think this is a bill we can enact today with confidence and with some 
degree of pride.

                               Exhibit 1


                              Associated Credit Bureaus, Inc.,

                                      Washington, DC, May 2, 1994.
     Hon. Donald W. Riegle, Jr.,
     U.S. Senate, Washington, DC.
       Dear Senator Riegle: We are pleased to advise you that the 
     Executive Committee of Associated Credit Bureaus, Inc. (ACB), 
     voted unanimously today to enthusiastically endorse Senate 
     passage of S. 783, the Consumer Reporting Reform Act, as 
     reported by the Senate Banking Committee and as further 
     amended by the Manager's amendment. Participating in this 
     endorsement were the three nationwide consumer reporting 
     systems referred to in S. 783, (Equifax, Trans Union and TRW) 
     and representatives for the 700 additionally independently 
     owned Credit Reporting Division members of ACB.
       ACB's support of S. 789 as amended is unqualified and we 
     urge its passage. Consistent with this position, today ACB 
     has advised all its credit reporting members to urge their 
     Senators to support you and your colleagues in passage of 
     this landmark legislation.
       The bill that you and Senators Bond, Bryan and D'Amato have 
     crafted represents a delicate balance of interests for which 
     you should be commended by all affected groups. While you 
     have been careful to consider the legitimate concerns of our 
     members and customers, there is no question but that American 
     consumers are the real winners today. We support S. 783 
     because it provides consumers with meaningful protection 
     while recognizing legitimate business costs.
       Congratulations and our thanks to you and your staff for 
     the effort you have put into amending this 23-year-old law. 
     We look forward to continued cooperation with you and your 
     staff toward final enactment.
       Best personal regards.
           Sincerely,
                                                D. Barry Connelly,
                                         Executive Vice President.


                         privilege of the floor

  Mr. RIEGLE. Madam President, I ask unanimous consent that during 
today's consideration of this legislation S. 783, Edwin O'Connor be 
granted the privilege of the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. RIEGLE. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BRYAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Lieberman). Without objection, it is so 
ordered.


                      Unanimous-Consent Agreement

  Mr. BRYAN. Mr. President, I ask unanimous consent that there be a 
time limitation of 1 hour for debate on the pending Lieberman amendment 
to be equally divided between Senators Lieberman and Levin, or their 
designees; that, at the conclusion or yielding back of time on the 
Lieberman amendment, Senator Levin be recognized to offer a relevant 
second-degree amendment thereto; that there be a time limitation of 30 
minutes on the Levin second-degree amendment equally divided between 
Senators Lieberman and Levin or their designees; that, at the 
conclusion or yielding back of time on the Levin amendment, the Senate, 
without any intervening action or debate, vote on or in relation to the 
Levin amendment; that, upon the disposition of the Levin amendment, the 
Senate, without any intervening action or debate, vote on or in 
relation to the Lieberman amendment, as amended, if amended.
  The PRESIDING OFFICER. Is there objection?
  Mr. BOND. Mr. President, there is no objection on this side.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 1668

    (Purpose: To express the sense of the Senate that the Financial 
   Accounting Standards Board should maintain the current accounting 
 treatment of employee stock options and employee stock purchase plans)

  Mr. GRAMM. Mr. President, I know that we are waiting for amendments 
to come to the floor. I would like to do something a little bit out of 
the ordinary; that is, I would like to speak on behalf of an amendment 
that has yet to be introduced. I am cosponsoring that amendment with 
several of our colleagues, in fact with our colleague who is now the 
Presiding Officer. In order to speed up the process, I would like to go 
ahead and speak on behalf of that amendment now.
  The PRESIDING OFFICER. As a proponent of the amendment on behalf of 
which the Senator from Texas wishes to speak, the Chair has no 
objection.
  Mr. GRAMM. Mr. President, the Financial Accounting Standards Board is 
generally an excellent board. It has proposed standards that have 
guided the American system of accounting for many years.
  Normally, the decisions they come up with make a lot of sense. But 
today we are trying to send a very clear signal that the proposal that 
they have made concerning employee stock options makes no sense. It 
does not reflect reality. And what are books and records for other than 
to give people a picture of what is in reality happening, particularly 
financially? If the way we keep our books, the way we engage in 
accounting does not reflect reality, it is not valuable.
  Here is the problem in a nutshell. I think you could make it 
complicated, but I think if you step back and look at it, the issue is 
very simple.
  Currently, one way that growing companies, especially many high-tech 
companies, attract good management and employees is by giving them a 
stake in the success of the company by offering them stock options. So, 
for example, a growth company with a new idea but without a lot of 
money would say to a person who was a proven manager that if he came in 
and ran this company they would pay him a modest salary, but they would 
also give him the right in the future to purchase the stock of the 
company at a fixed price. If as a manager this officer was successful, 
and therefore the company was successful, then that officer would be 
able to buy the stock at the agreed to price, which, given the 
successful management, would be below the market price of the stock at 
the time that the option was exercised.
  This is an established principle of financial compensation. It has 
been used a great deal in our country and has been very successful in 
helping growth companies become growth companies. It has helped them 
grow, create jobs, new technologies and opportunity for our country.
  The way that this has been accounted for and has been accepted is 
that the company notifies the stockholders that these stock options 
have been given as compensation by putting the information in their 
financial reports. It has not been the practice to apply the value of 
stock options against the earnings of the company. The very logical 
reason is that the granting of the employee stock options does not 
affect either the flow of cash into the company in terms of the sale of 
goods and services the company produces or the cost of producing those 
goods and services.
  What our amendment says is basically this: the current accounting 
procedure reflects reality far better than does the FASB proposal. If 
you guarantee an executive the right to buy the stock of a company at a 
fixed price and that price is below the market price, you are not 
affecting the earnings of the company one way or another by giving him 
the right to exercise that option. It is true that may be diluting the 
ownership of the company, but you are notifying the existing 
stockholders that such action has been taken. The stockholders are 
generally happy with the decision, because the employee would not 
exercise the option unless the stock price had gone up, increasing the 
value for all shareholders. This is an established principle that 
allows companies to attract good management and employees if they do 
not have a lot of cash.
  What the FASB proposal would do, remarkably, is to require companies 
to charge off stock options against their earnings. This in no way 
reflects reality, because giving employees the right to have an option 
to buy the stock does not affect the earnings of the company at all.
  What we are trying to do with this sense-of-the-Senate resolution is 
simply say to FASB to keep an accounting procedure that is related to 
reality. Let us keep our books in a way so they make sense.
  I would have to say, Mr. President, that I cannot understand why the 
Financial Accounting Standards Board came up with this proposal. I 
cannot understand how under any circumstances anybody would believe 
that a stock option ought to be charged against the earnings of a 
company. It makes no sense. For tax purposes we would never allow that 
to be done. It does not reflect the reality of what is happening in the 
company.
  The procedure that is now used requires the stockholders to be 
informed. Since they elect the officers of the company, they have a 
right to change the officers if they do not support the procedure. What 
we are trying to do is to keep in place a process that makes sense, 
that reflects reality, and that allows small companies to become big 
companies, allows them to generate jobs, growth, and opportunity.
  While normally it would be my position that this is something we 
ought not to get involved in, I think that this FASB proposal is so 
extreme and so potentially harmful, so in conflict with reality, that 
we should at least take a position on it.
  Let me also say that most of the stock owner groups in the country 
have taken a similar position. As ranking member of the Securities 
Subcommittee, I participated in a hearing on the subject last fall. 
There was great opposition to this proposed rule then, and that 
opposition has intensified. What we are doing in this sense-of-the-
Senate resolution, and I want to be sure that we vote on it so we have 
a recorded vote, is we are simply sending a signal about how deeply we 
feel about this proposal. Hopefully, along with all the other people 
who have taken a position in opposition to these new rules, we will 
successfully encourage the Financial Accounting Standards Board to 
change this whole ruling.
  I yield the floor.
  Mr. BRADLEY addressed the Chair.
  The PRESIDING OFFICER. The Chair recognizes the Senator from New 
Jersey, [Mr. Bradley].
  Mr. BRADLEY. Mr. President, I rise in support of the sense-of-the-
Senate resolution that the distinguished occupant of the chair will be 
offering in a short while and that the distinguished Senator from Texas 
has just addressed.
  This resolution mirrors a concurrent resolution that I offered, along 
with Representative Anna Eshoo of California. Make no mistake about it, 
the reason this proposal is on the floor of the Senate today is because 
of the leadership of Representative Eshoo. She has been tenacious in 
this regard and she does so out of the best interests not only of her 
constituency in the high-technology community, but the whole economy of 
the United States, She deserves a lot of strong support for her 
leadership on this issue in the House of Representatives. She has also 
been very active in lobbying a number of the Senators who will vote on 
this issue today.
  Let me also say at the outset that I have the highest respect for the 
Financial Accounting Standards Board. As I will state in my prepared 
remarks, I do not think that it is wise to write accounting standards 
on the floor of the Senate. At the same time, I think there are times 
when it is important to speak out, and I look at this resolution as one 
of those moments.
  The resolution asks the Congress to go on record against a proposed 
change in the accounting treatment of the employee stock options 
recommended by the Financial Accounting Standards Board, FASB. The 
basic question is whether, as FASB has proposed, a company should be 
required to recognize compensation cost for fixed stock options granted 
to employees.

  That is the basic issue before us. It is an accounting principal 
issue. It is not a tax issue. It is an accounting principal issue.
  The debate over the FASB proposal on employee stock options is one 
that has far-reaching consequences outside of ivory-tower discussions 
about whether stock options are compensation. The FASB proposal will 
seriously jeopardize one of the best tools that American companies have 
to attract, retain, and motivate their workers, all of their workers. 
It will impose a heavy burden on the ability of our crucial high-
technology and entrepreneurial sectors to raise funds in the capital 
markets. And it will do so at a cost to our system of financial 
reporting.
  Mr. President, I am reluctant to have Congress weigh in on issues of 
accounting standards. The Financial Accounting Standards Board plays a 
critical role in assuring the integrity of our financial statements. At 
the same time Congress cannot remain silent when, in the pursuit of 
questionable accounting purity, FASB threatens entrepreneurship and 
growth. That is why this resolution is so important today. I am not 
seeking to legislate changes to our accounting standards. I simply 
think that Congress should go on record in the form of a resolution 
before FASB final action on this issue and unwarrantedly harms our 
economic future. The timing of this resolution is particularly 
appropriate given that FASB has recently completed its formal review 
process.
  I would hope that they would not turn away from an expression of the 
Senate on this issue. And I hope that they would pay attention to some 
of the issues that are raised in the course of this debate. And one 
would hope that no legislation would ever be necessary because FASB 
perceived the need to move in the correct direction and not issue this 
particular provision. That is why, as I said, the resolution is 
important today.
  Mr. President, I do not expect Members of Congress to take my word on 
this issue about how important this is. The truth is that the FASB 
proposal has been nearly unanimously opposed by those who draft 
financial statements and those who rely upon them to make investments. 
Each of the big six accounting firms has spoken out against the 
proposal. The Council of Institutional Investors and the United 
Shareholders Association oppose the proposal. The National Venture 
Capital Association, the Biotech Industry Organization, the National 
Association of Manufacturers, the NASDAQ Stock Market, the Financial 
Executives Institute, the U.S. Chamber of Commerce, and the American 
Electronics Association oppose the proposal. Secretaries Bentsen and 
Brown have expressed serious concerns about the proposal. And perhaps 
most telling, a majority of the accounting standards executive 
committee of the American Institute of Certified Public Accountants, 
oppose this proposal. Mr. President, when management, their 
accountants, and their shareholders can all agree on something, then it 
is time for Congress to take notice.
  Let me state at the outset that I do not believe that the debate we 
are having today is about whether CEO's in America are getting paid too 
much. I expect to hear, in great detail today, about the large salaries 
being paid to our top executives. The irony is that FASB itself would 
be the first to admit that their proposed rule change has nothing to do 
with executive compensation. Critics of executive pay have simply 
focused on the wrong solution to the right problem. If we want to 
control executive compensation, then we should focus on strengthening 
the shareholder's hand against entrenched management. We should tighten 
disclosure and improve our proxy and independent director approval 
processes. I commend the recent SEC requirements to this end. I remain 
open to even tougher efforts to give shareholders a larger voice in 
executive compensation decisions. I simply do not believe that 
requiring an earnings charge for broad-based stock options plans will 
constrain CEO pay at all.
  Mr. President, it is ironic that those who would take aim at 
executive pay by opposing this resolution will, in fact, achieve the 
opposite result. CEO's will continue to get their pay packages if FASB 
continues and issues this regulation. It is rank-and-file employees 
that will be harmed. The companies that will be penalized the most 
through this proposal are the ones that offer stock option plans to all 
employees; not just senior management, but to all levels of employees. 
This proposal puts the company in the position of abandoning its broad-
based stock option plan or taking a large hit on earnings.

  (Mrs. BOXER assumed the chair.)
  Mr. BRADLEY. And if given the choice, Madam President, what do you 
think a company is going to do? It is not going to have an employee 
stock option program for the secretaries or for the janitors or for the 
midlevel management or for other levels of the company. It is simply 
going to abandon them. The CEO's will be able to take care of 
themselves, as they always do.
  We passed a provision last year that was supposed to limit executive 
compensation. I cannot tell you how easy that provision is to get 
around and how many lawyers have been employed to do just that. That 
will clearly happen. When you have CEO's who are paid a lot of money, 
they will find a way to get the money, even with this proposal. Those 
who will not find a way to do it are the so-called little people in 
firms that simply seek to have their investment grow with the company 
as it succeeds.
  Mr. President, the real debate we are having today is whether the 
benefits of the FASB proposal outweigh its costs. In its mission 
statement, FASB states that it should ``promulgate standards only when 
the expected benefits exceed the perceived costs.'' I feel that the 
proposal we are looking at today fails this standard--and by a wide 
margin.
  The burden of the FASB proposal will fall disproportionately on our 
Nation's high technology sector. Not only do they rely much more 
heavily on stock options than other companies, but they also show more 
stock price volatility. Under the FASB proposal, this volatility will 
require them to take even larger earnings charges. One survey by the 
Wyatt Co. indicated that high technology companies will suffer an 
almost 50 percent decline in earnings, while other companies will lose 
about 6 percent of their earnings. Given that this sector will play an 
increasingly important role in the American economy, I question the 
wisdom of putting them at a disadvantage in the capital markets.
  Worse, the biggest hit will be taken by entrepreneurial companies. 
Startups must often rely on granting options to attract employees. They 
make up for the riskiness of their ventures by sharing the upside 
potential with their employees. Unlike other forms of compensation, 
stock options also result in a net inflow of capital into the 
corporation. And while their costs fall largely on corporate 
shareholders, they are already subject to shareholder approval and 
their dilutionary impact is disclosed by the earnings per share 
calculation. FASB's proposal will make these stock options much more 
expensive to provide, needlessly putting in jeopardy our successful 
model of entrepreneurship in this Nation.
  You might be able to justify these costs to our Nation's economy if 
there were offsetting benefits in the form of more credible financial 
statements. But the expense that FASB will be requiring will be 
uncertain and speculative. FASB's proposal requires an immediate charge 
against earnings regardless of whether the stock price rises or whether 
the options are actually exercised.
  More important, FASB is also relying on models designed for publicly 
traded options to assign values to these options.
  This is a faulty analogy. Employee stock options are nontransferable 
and subject to stringent vesting requirements. Further, FASB's proposal 
eliminates stock price volatility as a variable for privately held 
companies. If the end goal for FASB is comparability and credibility, 
then one has to question whether that end is served by different models 
applying to different companies.
  The crux of this debate is over this one issue--can these stock 
options be credibly valued. By far the vast majority of analysts who 
have looked at this issue suggest that they cannot. I would like to 
quote extensively from the comment letter to FASB from the Accounting 
Standards Executive Committee of the American Institute of Certified 
Public Accountants--a group that clearly has no interest in this debate 
other than the creation of credible and sound financial statements.

       A majority of the Accounting Standards Executive Committee 
     disagrees with this proposal as to fixed stock options 
     granted to employees because (1) the models used to calculate 
     the fair value of such options were designed for use with 
     traded options--in other words, options where you can 
     actually set a price because there is a market--and (2) the 
     expense amount for such options based on those models cannot 
     be validated by reference to transactions with third parties 
     and therefore lacks sufficient reliability for recognition in 
     financial statements. This majority concludes that the 
     usefulness of statements for investment and credit decisions 
     would not be improved by including in financial statements 
     the expense amounts determined under those models. They 
     believe that current or improved disclosure requirements 
     would adequately inform financial statement users about fixed 
     stock options granted to employees.

  So there it is. In any cost-benefit analysis, it is critical to 
consider possible alternatives. In this instance, a reasonable 
compromise for FASB to take would be expanded footnote disclosures as 
proposed by the AICPA. If the goal is to provide shareholders with 
information about the costs of stock options and a basis on which to 
make company-to-company comparisons, then an appropriate response would 
be to require an unambiguous, uniform disclosure. Not surprisingly, 
this is the approach that also has been favored by the major business 
associations, the Big Six accounting firms, and the major shareholders 
associations. The only group that has not signed onto this approach is 
FASB.
  In closing, I think it is important for Congress to listen to the 
true users of financial statements--shareholders and investors. They 
have been lobbying against this proposal. Quoting from the United 
Shareholders Association, ``We do not believe FASB's proposal would 
clarify the reports we receive. In fact, we believe that including 
speculative estimates of future stock options values in corporate 
earnings statements diminishes rather then enhances their usefulness.''
  It is not too late for Congress to send a clear signal to FASB that 
questionable accounting purity cannot be allowed to jeopardize 
entrepreneurship and economic growth. It is not too late to prevent 
FASB from harming the credibility of financial statements.
  I strongly encourage everyone to support the resolution today that 
will be offered by the distinguished Senator from Connecticut. I am 
proud to join as a primary cosponsor.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Bryan). The Senator from Connecticut.
  Mr. LIEBERMAN. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Connecticut [Mr. Lieberman], for himself 
     and Mr. Mack, Mrs. Boxer, Mr. Gramm, Mr. Bradley, Mrs. 
     Feinstein, Mr. Bingaman, Mr. DeConcini, Mr. Wellstone, Mr. 
     Gorton, Mr. Shelby, Mr. Bennett, Mr. Faircloth, Mrs. 
     Hutchison, Mr. Lautenberg, and Mr. Robb proposes an amendment 
     numbered 1668.

  Mr. LIEBERMAN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place insert:

     SECTION 1. FINDINGS.

       (a) The Financial Accounting Standards Board (FASB) is 
     currently considering changing the Generally Accepted 
     Accounting Principle relating to employee stock option plans 
     and stock purchase plans;
       (b) FASB's proposal that would require the use of complex 
     mathematical formulas to estimate a value for employee stock 
     options at the date of grant and requires those estimated 
     values be deducted from earnings on companies' income 
     statements;
       (c) FASB has just completed an extended review of its 
     proposal which included a public comment period, numerous 
     field hearings and a field test;
       (d) FASB's proposal has generated opposition which is 
     unprecedented in both its intensity and universality;
       (e) The accounting profession, as represented by the 
     American Institute of Certified Public Accountants and each 
     of the 6 largest national accounting firms, oppose FASB's 
     proposal;
       (f) Individual investors, as represented by the United 
     Shareholders Association, oppose FASB's proposal;
       (g) Institutional investors and pension funds, as 
     represented by the Council of Institutional Investors, oppose 
     FASB's proposal;
       (h) Both the Secretary of the Treasury and the Secretary of 
     Commerce have raised serious concerns about FASB's proposal: 
     ``Most troubling is the possibility that implementation of 
     the proposal might result in more volatile and less accurate 
     and consistent financial statements because of the extreme 
     difficulty of valuing long-term, non-marketable, forfeitable 
     stock options;''
       (i) There is a broad consensus among those who have studied 
     the FASB proposal it will diminish and not improve either the 
     integrity or comparability of information available to 
     investors;
       (j) The National economic policy implications of FASB's 
     proposal are substantial because small, growth-oriented 
     companies often lack capital and therefore regularly rely on 
     broad-based employee stock options to attract employees and 
     large business provide employee stock options and broad-based 
     employee stock purchase plans to help motivate their 
     employees and improve productivity; and
       (k) The FASB proposal will diminish the ability of small 
     companies to raise capital and attract employees and it will 
     curtail, not enhance broad-based employee ownership.

     SEC. 2. SENSE OF THE SENATE.

       It is the Sense of the Senate that--
       (a) the new accounting treatment of employee stock options 
     and employee stock purchase plans, proposed by the Financial 
     Accounting Standards Board, will have grave economic 
     consequences particularly for businesses in new-growth 
     sectors which rely heavily on employee entrepreneurship;
       (b) the new accounting treatment of employee stock options 
     and employee stock purchase plans, proposed by the Financial 
     Accounting Standards Board, will diminish rather than expand 
     broad-based employee stock option plans; and
       (c) the Financial Accounting Standards Board should not at 
     this time change the current generally accepted accounting 
     treatment of stock options and stock purchase plans contained 
     in Accounting Principles Board Decision 25.

  Mr. LIEBERMAN. Mr. President, I thank my colleagues, the Senator from 
Texas and the Senator from New Jersey--both of whom are cosponsors--for 
the statements they have made in anticipation of the introduction of 
this amendment.
  Mr. President, as both of my colleagues have indicated, this 
amendment expresses the sense of the Senate about the Financial 
Accounting Standards Board, a little known but powerful entity--and the 
occupant of the chair may not know this--which actually exists in 
Norwalk, CT. Our expression here is a sense of the Senate that FASB, as 
it is known, should drop its highly controversial stock option proposal 
and maintain the current generally accepted accounting treatment for 
employee stock options.
  To the listener this may seem like a lot of technical, arcane 
accounting jargon. Stock options seem themselves far away. But this is 
real stuff and it relates directly to the ability of new companies to 
raise capital; the ability of new companies to create jobs; the ability 
of new companies and older companies to attract the best employees. And 
part of the attraction is to offer them a stake in the company, a piece 
of the ownership.
  Stock options are a remarkable and uniquely American device for 
literally spreading the wealth, for creating a broad class of owners in 
companies that are starting up and those that are well along in their 
history.
  So, though it may be arcane, though it may deal with technical 
accounting rules, in my opinion what is on the line here really is the 
future of jobs in this country, and the ability of high-tech, cutting-
edge companies to start up and create the new jobs that we need to put 
people back to work, particularly those who have lost their jobs in the 
recession.
  Let me try to set out and explain some of the vocabulary. What is a 
stock option? A stock option is the future right of an employee to 
purchase a certain number of company shares, shares in the company, at 
a fixed price. Presuming the company does well and the stock price 
increases, the employee obviously shares some of the benefit. But if 
the stock price remains constant or decreases because the company has 
not done well, the employee gets nothing.
  The Financial Accounting Standards Board has proposed a highly 
controversial and almost universally opposed accounting standard which 
would require companies to use a complex mathematical formula to 
estimate the value of an employee's option on the day on which the 
company grants it to the employee and to record that estimate as a 
reduction to their earnings regardless of whether the employee ever 
receives a benefit--in other words, whether the company does well and 
the stock option is actually worth anything.
  This is an attempt by FASB, in my opinion, to carry out its 
responsibility for disclosure but to ultimately try to do something it 
is impossible to do, which is to value something that has no value at 
the moment at which FASB wants to value it.
  I think we can all agree that the goal of financial reporting should 
be to maximize the integrity and comparability of financial statements. 
No one is arguing--I am not arguing and saying that stock options 
create jobs, that job creation justifies bad accounting. But we are 
saying that an accounting standard ought not to move forward if the 
economic consequences of that proposed standard so clearly outweigh the 
alleged accounting benefits, and that is exactly what we have in FASB's 
proposed rule.
  This rule has been subjected to a long string of hearings. The 
argument that I am making now has been made consistently at those 
hearings held by FASB. Both the public comment period and the public 
hearings made clear that FASB's proposal will be uniformly unaccepted 
by nearly all parties that are affected by it including investors, 
preparers and accountants. Indeed, the public comment period and the 
field hearings that are now concluded should lead to a summary and a 
conclusion that the stock option project ought to be dropped in favor 
of an alternative that discloses what stock options have been granted. 
In other words, not to require a charge against earnings but just to 
have the statement of the company say very clearly what options have 
been granted. That would be full disclosure and would have none of the 
negative consequences that the proposed rule would have.
  Mr. President, the extensive hearing process that FASB has been 
through taught us some important lessons about this proposal, and I 
would say probably the most important is that the current accounting 
treatment for employee stock options is not the result of some 
conspiracy to enrich corporate executives. It is the result of a 
genuine accounting quandary and dilemma.
  Second, accurately estimating the present value of an employee stock 
option at the date on which it is granted is, as I have said, simply 
not possible. The option is granted on a given day. It is only later 
that it is determined by market forces whether the option is worth 
anything and what it is worth. How can we possibly have a system which 
values that option on the day on which it is granted before there is 
any clear understanding of its value?
  During the FASB hearing process, there has been a genuine flood of 
testimony and letters and studies from all sides of the financial 
community making this point. Let me just quote from a letter sent by 
Secretary of the Treasury Lloyd Bentsen and Secretary of Commerce Ron 
Brown. They say:

       Most troubling is the possibility that implementation of 
     this proposal might result in more volatile and less accurate 
     and consistent financial statements because of the extreme 
     difficulty of valuing long-term, nonmarketable, forfeitable 
     stock options.

  Even the American Institute of Certified Public Accountants, 
representing more than 310,000 CPA's in America, has withdrawn its 
support of this proposed rule, saying that it is too complex and 
unreliable. So the accountants who were a part of raising the question 
have now rejected the proposed answer that FASB has given. Since the 
FASB comment and testing process has now been concluded, it seems to 
those of us who are sponsoring this amendment it is now appropriate for 
Congress, we in the Senate in this case, to express our opinion on the 
matter. Indeed, the FASB stock option proposal is so potentially 
damaging to job creation and to economic growth that we would be 
abdicating our responsibilities if we did not weigh in and do all we 
could to prevent this damage from occurring.
  (Mrs. BOXER assumed the chair.)
  Mr. LIEBERMAN. Madam President, let me just take a few moments to 
outline the three reasons why I believe my colleagues should vote in 
favor of this resolution. First, stock option plans are broad based and 
are growing. We all know, as the Senator from New Jersey said, some of 
the dramatic stories about a relatively small number of very well-
compensated executives. The fact is that last week's Business Week had 
their annual survey on executive compensation and pointed out that 
Michael Eisner, the CEO of Disney, had a salary last year that was just 
short of the gross national product of Grenada.
  Now, it may be, Madam President, that my children feel Mr. Eisner 
deserves that extraordinary salary. However, those stories do not paint 
an accurate picture--and the public reaction to them of anger 
understandably--of the role stock options play in the U.S. economy, 
nor, most importantly, who gets stock options. In fact, this debate has 
nothing to do with executive compensation. That, incidentally, is one 
point where FASB and those of us who are putting forth this amendment 
are in agreement. FASB has pointed out over and over again that their 
proposal is about accounting, not compensation. To assert that FASB's 
proposal is about executive compensation is like arguing that the 
Boston Tea Party was about tea. Obviously, it was about something 
larger, as is the FASB proposal.
  Now, I understand it is difficult to separate the two issues, but let 
me make a few points. The fact is that there are thousands and 
thousands of companies throughout America that offer stock option 
packages, and hundreds of thousands, probably millions, of employees 
who receive them.
  Let me just mention a few of the companies that have broad based 
stock option plans. They include Microsoft, Genentech, Wal-Mart, Intel, 
Motorola, Wendy's, Pepsico, DuPont, NationsBank and Pfizer.
  Even long-established companies like Greyhound Lines give options to 
60 percent of their hourly employees, and the practice is even more 
widespread and probably even more critical among smaller newer 
companies. The fact is that America's most dynamic job-creating 
companies consistently rely on employee stock options to attract and 
motivate their employees--not just their top executives, all their 
employees, the employees that make the companies go.
  To make this point, let me mention two recent surveys. The NASDAQ 
stock market reported that 95 percent of NASDAQ firms offer stock 
options to employees--95 percent of NASDAQ firms. And of those firms, 
33 percent have plans to expand the scope of their option offerings to 
more employees in the near future.
  Another survey which is highlighted on this chart, Madam President, 
makes the point even more strongly.
  This bar is a dramatization of companies in America which have fewer 
than 100 employees that offer stock options. Of companies in America 
with fewer than 100 employees that offer stock options, 89 percent of 
them offer them to every one of their employees, the boss right down to 
the person sweeping the floors. So in companies of less than 100 
employees, 9 out of 10 of those companies offer options to every 
employee. You can go down the list.
  Incidentally, as we see it, it is only the very largest that have 
over 5,000 employees, where 4 percent offer to every one of the 
employees.
  This is a slightly different dramatization which makes another point. 
This is of all companies offering stock options. In a way, you have to 
see this as a total of what we have just seen on the other chart. Of 
all companies offering stock options, 35 percent offer them to every 
employee; 48 percent offer them to all in the managerial groups. But 
what I really want to point out is that of all companies offering stock 
options, 7 percent only offer them to senior managers. So these stock 
options really are a great, broad-based middle-class benefit.
  Madam President, the second point why I think it is an important 
amendment is that stock options really represent enormous 
opportunities. That is why it is described as a great middle-class 
benefit. They make it possible to start new companies and create new 
jobs. They enable growing companies to attract and keep people. They 
stretch scarce venture capital dollars and allow companies to hire more 
people than they otherwise would.
  Part of the damage of the FASB proposal is that in forcing companies 
to take a charge against earnings, there is a danger that in reducing 
the apparent earnings of a company, a new company particularly, they 
will make that company less attractive for investment, and therefore 
make it harder for that company to attract the capital it needs to grow 
and create new jobs.
  Nearly every study of what works in successful companies advocates, 
encourages, employees to buy and own meaningful purchases of their 
company's stock. There is just no substitute for an employee feeling 
that he or she is not just getting a salary but they own a piece of the 
company, and when the company makes money, they make money and the 
value of that stock goes up.
  One of the most recent studies that has been done on this question 
deals with the charge against earnings which had a dramatic result, is 
that smaller companies would be hit with as much as a 40 percent annual 
charge to earnings. If this proposed FASB rule would go into effect, 
that would have a devastating effect on the companies' ability to 
attract investment, and therefore would put tremendous pressure on the 
company not to offer stock options to as many employees as they do.
  I must say to my colleagues who may be concerned about executive 
compensation, that again this is not about executive compensation. But 
you know, the net effect, if the FASB rule went into effect, would be 
that the folks at the top would hardly see a difference because the 
folks at the very top of the companies would continue to receive the 
stock options. That is just the nature of the relationship; the reality 
of it. It is the people in the middle and below that would be deprived 
of owning a piece of the company that they work for. Stock options 
represent significant economic opportunity for those mid-level and 
middle-class employees who receive them.
  For these people--and I have talked to a lot of them as I have gotten 
into this issue--these stock options represent the difference between 
working for a company, and participating in a company, owning part of 
the company. But they represent something much more than that in 
personal terms. For these hundreds of thousands of employees, stock 
options are an extra bonus. They are a dividend, if you will. They are 
the means by which an employee can make the downpayment on a new house, 
can pay for a child's college education, can create a nest egg for 
retirement, or perhaps even can put together enough money to have the 
capital to open a business of his or her own and create more jobs that 
way.
  Third, and finally, the FASB proposal is, as my colleagues have 
stated, being universally opposed by the overwhelming majority of the 
financial community. Last summer, the United Shareholders Association, 
the national group representing 65,000 individual investors, said:

       As investors and regular users of corporate financial 
     reports, USA members are the very people the accounting rules 
     are designed to protect. Our members oppose charging earnings 
     for stock options. We do not believe FASB's proposal would 
     clarify the reports we receive. In fact, we believe that 
     including speculative estimates of future stock option values 
     in corporate earnings statements diminishes rather than 
     enhances their usefulness.

  These are individual stockholders, investors.
  Perhaps the strongest statement, however, that I have seen comes from 
the Council of Institutional Investors representing the largest 
institutional investors in pension funds. Before I read it, I want to 
note with some disappointment that my colleagues and I have received a 
letter from the AFL-CIO Legislative Alert urging opposition to this 
amendment. I do want to say two things: One is that the letter is 
mistaken about the content of the amendment. The letter refers to a 
bill that the occupant of the chair and I have cosponsored overturning 
the FASB ruling if it goes into effect.
  This amendment does not do that. This amendment, as its proponents 
have stated, expresses the sense-of-the-Senate that FASB withdraw this 
proposed rule. It is in that sense not mandatory. But if my legal days 
are not too far behind me and I remember the word correctly, it is 
``preparatory.'' I will check that as the day goes on.
  The AFL-CIO letter says that the group is concerned because of their 
position as shareholders in pension plans. But here is the group, the 
Council of Institutional Investors, representing the pension plans, 
representing the institutional investors saying:

       There is no group that has a greater interest in the 
     principled ``right' answers to accounting questions than we 
     do. We are the people who invest real money--huge amounts of 
     money--based upon what we read in financial statements.

  Here is an important line: ``We are America's employees * * *'' and I 
would daresay, parenthetically, a lot of them are unionized employees.

       * * * and America's retirees, and we will not get our 
     pensions if we do not invest wisely based on accurate 
     financial information. So no one will be hurt more than we if 
     any other agenda--however virtuous--is pursued at the expense 
     of the accuracy and usefulness of financial statements. This 
     is real people's grocery money.

  She goes on to say:

       The exposure draft requires companies to put something in 
     their financial statements that simply isn't true.

  That is the end of the quote, and a very powerful statement from 
people who have a real interest in accurate accounting standards.
  Madam President, this is an important statement for the Senate to 
make. A lot of us--the occupant of the chair, myself--represent States 
that do not feel that they really have come out of this recession. 
Although the national economic indicators say that the Nation has, we 
know that our people have not. We know that a lot of people are still 
unemployed as a result of the recession. We know a lot of these people 
are highly capable. We know we can retrain them. But then the question 
is, train them for what? And we have to create the jobs that will put 
our people back to work. To make a long story short, stock options are 
one of the great tools that we have today to create new companies and 
give the workers who are hired by those companies a piece of ownership 
in those companies, to enrich themselves and their families.

  This accounting rule, motivated by good intentions--accounting 
intentions--has a disastrous effect on this wonderful and uniquely 
American idea of stock options.
  So I urge my colleagues to support the statement of the opinion of 
the Senate, hoping that it has an impact on the people at FASB and that 
they withdraw this rule.
  I suggest the absence of a quorum, and I ask unanimous consent that 
the time be charged equally against both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mrs. BOXER. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Lieberman). Without objection, it is so 
ordered.
  Mrs. BOXER. Will the Chair inform me as to how much time remains?
  The PRESIDING OFFICER. The Senator from Connecticut controls 20 
minutes.
  Mrs. BOXER. I ask if it would be all right if I took about 12 minutes 
of that time.
  The PRESIDING OFFICER. The Chair, acting in his capacity as a Senator 
from Connecticut, yields 12 minutes to the Senator from California.
  Mrs. BOXER. I thank the Chair.
  I am very proud to be a cosponsor of the amendment, along with 
Senators Lieberman, Mack, Gramm, Bradley, Feinstein, Bingaman, 
DeConcini, Wellstone, Gorton, and Shelby.
  I would venture to say that there are not many times in the Senate 
when I can read to you a list of Senators of such diverse philosophies 
that have come together to say that the FASB stock option proposal 
would be damaging to many companies in our Nation. I can certainly say, 
as one of the Senators from California, it would be very damaging to 
California's nascent economic recovery.
  I would say that the investors do not want the new FASB rule, as the 
Senator from Connecticut stated. The accountants do not like it. I 
think I can only conclude that FASB just does not get it, Mr. 
President. I know they do come from the Senator's beautiful State of 
Connecticut, and they seem to have their green eyeshades on all right, 
but they just do not seem to get the ramifications of this seemingly 
simple proposal.
  I feel it very important that we speak out today in a clear voice, 
and what we say by supporting your amendment is that stock options are 
an important tool for high-tech and start-up companies. I have met with 
the Chairman of the SEC and discussed this with him on a one-to-one 
basis. I questioned him about it on the Banking Committee. I met with 
the head of FASB, along with Congresswoman Eshoo who has been a 
tremendous leader on this. Yet, we cannot seem to get through.
  This proposal ought to be dropped and it ought to be dropped now. It 
has taken them years and years to get to this point, and now they are 
saying they are not going to have a decision for another year. Maybe 
the reason it has taken so long is that in their hearts they know it is 
wrong. What we are saying today as the Senate--I hope what we are going 
to say today--is that they have to take their green eyeshades off over 
at FASB and pay attention to the ramifications of this proposed rule.
  As the Chair pointed out, companies in our country use stock options 
to hire the talented scientists, engineers, and executives needed to 
make a high-risk enterprise a success.
  Mr. President, in March of this year, more than 3,000 employees of 
the Silicon Valley companies showed how important stock options are by 
rallying in San Jose against the FASB proposal, and there were 
employees there from very large companies and from very small 
companies. It was not the highly paid executives that marched. There 
were middle managers, researchers, scientists, engineers, and 
receptionists. They understand that if FASB goes forward with their 
rule, the stock options of the lower paid employees will be the first 
to go. They understand that FASB's rule will cut short the trend of 
companies to grant stock options to employees up and down the corporate 
chain of command.
  In October 1993, ShareData--a company that provides software for 
stock options--conducted a survey of companies that grant stock 
options. They found--and the Chair pointed this out, and I am being 
repetitive, but sometimes that helps--that roughly 35 percent of these 
companies, large and small, give stock options to all employees. So 
much for the argument that this is for the highest paid. You have 
pointed out very clearly with your charts that only 7 percent of the 
companies that give stock options give it to the highest paid managers.
  So let us get this straight: When we talk about stock options, we are 
talking about middle-class America. We are talking about people in many 
cases who are just entering the job pool. These options are critical to 
high-tech and biotech companies who must attract the best talent. They 
cannot afford to pay them in hard cash at the beginning.
  Again, as you have pointed out, Mr. President, it gives these young 
people a chance to be part of the company, to work so hard, because 
they know that, in the end, they have an ownership of this company.
  Let us not put the brake on our economy in California. We make up 14 
percent of the Nation's gross domestic product. If we see this FASB 
rule go into effect, and suddenly companies have to treat these stock 
options as a charge against their earnings, we are going to see this 
economy brake so fast it is going to make our heads spin. And that is 
wrong. That is wrong for ordinary people who need these kinds of jobs.
  When companies cannot attract capital because their bottomline looks 
bad, even though it is not bad, that would be the result of the FASB 
rule. They cannot get the capital. And if they cannot get the capital--
and for those watching us, capital is dollars, money, investment 
dollars that we need to put people to work. If these people cannot get 
capital, they cannot grow. We already worry about interest rates 
rising, and it is true that the Federal Reserve Board controls that. 
Some of us are worried. We want to check inflation, but we are worried 
that the cost of capital--money--is too high. But here is something--
the FASB rule--which will make a problem out of no problem.
  The Fed has reasons. It says we want to check inflation. OK, we can 
understand that. We may not agree, but we understand it. But the FASB 
rule has no rhyme or reason as far as I can tell.
  I want to talk to you, Mr. President, about a company in my State 
called Shaman Pharmaceuticals, because I am so proud of this company. 
It is a 4-year-old company in South San Francisco, and this is what it 
is doing: Discovering and developing new classes of pharmaceuticals 
from rain forest plants that have a history of medicinal use. They send 
their people into the rain forest, and they are finding products. They 
are in the clinical trial stage with at least two drugs I know of. One 
will treat a common respiratory illness that strikes all children at 
least twice before the age of 5 and is one of the major killers of 
children in developing countries. There is another one, a skin 
treatment that helps ease the pain of those suffering from AIDS.
  The reason I am particularly proud of this company is that it was 
founded by a young woman whose name is Lisa Conte, who made her dream 
come true through cash advances on her own personal credit cards. At a 
time when many California companies were giving their workers pink 
slips, Shaman Pharmaceuticals grew and hired employees for research and 
development and management jobs. They grew from one employee, Lisa, to 
90 employees in just 4 years.
  Shaman Pharmaceuticals, Mr. President, provides each and every one of 
its employees with stock options. These are people who have a stake in 
the company.
  Here is what Lisa Conte, head of Shaman Pharmaceuticals, has to say 
about the FASB proposal that we are working to derail. She says that it 
represents ``a critical threat to the Nation's entrepreneurial 
companies.'' This is a young woman who started a company from nothing, 
that grew to 90 employees in 4 years. Every single person in her 
company has stock options. This is what she says:

       Were FASB to require that we treat stock options as 
     expenses, the bottom line ``hit'' we will take will reduce 
     dramatically our attractiveness as an investment. Without an 
     ability to raise capital in the public markets, we simply 
     cannot survive as an entrepreneurial entity. Furthermore, we 
     will lose an important means of attracting talent to our 
     industry.

  That is from someone who is out there creating jobs.
  We all come to this floor. We talk about how important it is, and 
with all due respect to my colleagues, we do hire people and they go on 
the Federal payroll. But many of us used to work in the private sector. 
We no longer do, but we do look to the private sector now to build jobs 
for people. And here is someone, a young woman who started a company 
with a couple of thousand of her own dollars. She is now up to 90 
people. She is begging us to intervene in this situation.
  All in the name of an accounting theory, we could truly dampen this 
economy just as the President said we are coming out of a recession. We 
cannot afford this FASB stock option proposal.
  We know the accountants do not like it as was brought out. The 
accounting profession, as represented by the American Institute of 
CPA's and each of the Big Six accounting firms, opposes this FASB 
proposal. It is not good for companies, it is not good for our economy; 
investors do not want it, and accountants do not like it.
  I do not know who likes this proposal. I am sure we may hear a few 
come out on the floor today. But if you take the green eyeshades off, 
Mr. President, and open your eyes to what would happen, unless you want 
to put the brakes on this economy, you really should stand up and be 
heard today, this evening, and support Senator Lieberman's proposal.
  Again, I have met with the FASB people. I have to admit, here on this 
floor I am told I am a persuasive person, I am not terribly sure I 
moved them. And I am very concerned. I do not like to interfere with an 
independent accounting board. I do not want us to legislate accounting 
rules.
  Let me be clear on the Record, since others have said other things. 
If it means we need to do this, I am going to stand with the occupant 
of the chair. If we need to legislate accounting rules, I am not going 
to walk away from that fight, because precedents are fine, but once in 
a while, you have to say what is the pragmatic result of what a little-
known board is doing somewhere up in beautiful Connecticut.
  Now there is talk of delay. They are talking about 1995 when they 
will give us their decision. That has a chilling impact on what is 
happening out there.
  So, in conclusion, I urge my colleagues to send a strong message to 
those green eyeshade folks who make up FASB. I urge my colleagues to 
support the Lieberman-Mack-Boxer-Bradley resolution, and the other fine 
names that are attached to it.
  It is time to tell FASB to take the blinders off and lift the cloud 
that is hanging over the heads of our growing job-creating industries, 
vote for our resolution, and send FASB the message that this body will 
not allow an accounting rule to get in the way of job creation and 
business growth.
  Mr. President, once more I thank you for your leadership in this. I 
am very, very proud to be working on this issue with you, and I yield 
the floor at this time.
  The PRESIDING OFFICER. The Chair recognizes the Senator from 
California [Mrs. Feinstein].
  Mrs. FEINSTEIN. Mr. President, I commend my colleague, Senator Boxer, 
for those excellent comments on the subject. I would like to add my own 
remarks to this in support of my colleague's, and Senator Lieberman's 
sense-of-the-Senate resolution essentially to ask FASB to cease and 
desist in this proposed accounting rule.
  At a time when California continues to just begin to break out of the 
recession, when our economy is struggling to convert thousands of 
defense jobs into private sector jobs, I think it is critical to ensure 
that the growth of the high technology industry, over one-third of 
which is located in the State of California, is not curtailed by FASB's 
decision to impose huge new accounting charges on the use of employee 
stock options.
  I am concerned that if FASB's rule is adopted tens of thousands of 
desperately needed jobs in California and the Nation will never, in 
fact, be created.
  Now, a lot of my colleagues may not be familiar with the widespread 
use of employee stock options. Certainly, we have heard them attached 
to CEO salaries. We have heard them attached to golden parachutes. But 
this is not what we are talking about. Broad-based employee stock 
option plans play a crucial role in creating and sustaining the 
entrepreneurial culture that is essential to competitiveness in high 
technology.
  They are especially important to startup companies that depend on 
options to attract and retain key technical talent that would be beyond 
their ability to attract with cash compensation alone.
  A stock option is a right granted to an employee to purchase stock in 
his or her own company at today's price for a specified time in the 
future. Options help the company by giving employees a strong incentive 
to work to increase the value of their company's stock. Stock options 
help create jobs by stretching the cash of venture capitalists and 
other risk capital investors. By sharing stock with employees in 
addition to their cash compensation, more companies and more jobs can 
be created from the limited investment capital pool that is available 
today.
  Let me just quote some of the views of those who use stock options.
  James Diller, chairman and CEO of Sierra Semiconductor in San Jose 
has stated:

       If the FASB proposal were to be enacted, Sierra would be 
     forced to scale back or drop altogether our broad-based 
     employee equity programs. If, after the proposed accounting 
     rules took effect, we were to keep these programs in their 
     current form our earnings would be severely impacted, which 
     in turn would depress our stock price, make it harder to 
     borrow money and as a result make it much harder to grow and 
     create additional jobs.

  This is not what we should be doing.
  Mr. Paul Commons, vice president of finance at Connect in Cupertino 
wrote:

       Because most information technology companies lack the 
     financial resources to attract highly skilled and experienced 
     employees, stock options make it possible to compete, attract 
     investors and capital and to reward employees who perform 
     well. The FASB proposal will threaten the livelihood of my 
     company and the high technology industry as a whole by making 
     this reliable recruitment tool prohibitively expensive.

  The Secretary of the Treasury, the Secretary of Commerce, and each of 
the Big Six accounting firms oppose FASB's proposed rule on the 
treatment of stock options.
  Here you have the Secretary of the Treasury, the Secretary of 
Commerce, and every Big Six accounting firm in opposition to what FASB 
is proposing to do. Although this might seem like a technical matter, 
it is extremely important to the workers of California.
  I would like to show you, Mr. President, petitions signed by 8,000 
employees in California who were saying, ``FASB do not do this.'' You 
may think FASB--what do employees know of FASB? I can assure you that 
every employee of every high-tech firm in the United States knows 
exactly what this proposed FASB rule is. It is key and critical to 
their well-being, to the well-being of their company and, frankly, to 
the well-being of their jobs.
  (Mrs. BOXER assumed the chair.)
  Mrs. FEINSTEIN. I hope the Members of this Senate will register their 
concern by voting for the Lieberman amendment that is before us, and I 
join you, Madam President, in my support for that amendment. I yield 
the floor.
  The PRESIDING OFFICER. The Senator from Connecticut controls 1 minute 
and 30 seconds.
  Mr. LIEBERMAN. Madam President, I suggest the absence of a quorum, 
and ask unanimous consent the time be charged equally to both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. LEVIN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEVIN. Madam President, I oppose the amendment which is before 
the Senate, which is aimed at blocking the proposed stock option 
accounting reforms that have been proposed by the independent 
accounting board which is in charge of accounting rules.
  Over the last few years, I have spent a lot of time learning about 
stock options. They are complicated to understand and complicated to 
explain. I am convinced, however, despite the well-meaning intention of 
my colleagues and despite some of the rhetoric relative to the 
involvement of small business in this whole effort, that this 
resolution, if adopted, would put the Senate on the record against 
honest accounting. And that is what the issue comes down to--simply 
honest accounting rules; and, who is going to make the decision on 
those rules, political bodies or independent accountants?
  The way I got into this issue was through the controversy over the 
high levels of executive compensation that were being paid to CEO's of 
American corporations, as compared to what their workers were making, 
as compared to what the cost of living was doing, as compared to CEO's 
elsewhere in the world.
  The Senate subcommittee which I chair, the Subcommittee on Oversight 
of Government Management, held a hearing in 1991, after business 
publications ran cover stories about the explosion of executive pay in 
this country and the disconnect between executive pay and corporate 
performance. That hearing showed that CEO pay of American companies 
skyrocketed during the 1980's, outpaced CEO pay in the rest of the 
world, outpaced the pay of average workers and, indeed, outpaced 
corporate profits.
  The first chart, which we used at that hearing, shows what happened 
to CEO pay over the period 1960 through 1990. During the 1960's, during 
the 1970's until 1980, there was a relationship between corporate pay 
and the pay of, say, an engineer, which is the black line here; the pay 
of a schoolteacher here, which is the blue line; and the pay of a 
factory worker, which is the red line.
  Until about 1980, those pay levels were relatively the same. Our 
boats kind of rose and fell together in this country. The average 
factory worker went up, the schoolteacher would tend to go up, and the 
engineer would tend to go up. The executive, of course, was always 
above them, but nonetheless went up at about the same level generally.
  Then something happened in 1980, when, all of the sudden, corporate 
executive pay in this country skyrocketed literally off the charts, 
while the rest of us continued more or less to be moving at about the 
same direction and at about the same pace.
  This next chart shows a little more detail about that widening gap. 
This now picks it up in 1986. It takes a look at CEO pay in the 25 
largest industrial companies in America with revenues over $2 billion. 
It looks at workers' pay, which is the red line; and it looks at the 
cost-of-living, which is the blue line, which means, by the way, that 
worker pay actually fell behind the cost-of-living during those years. 
In the second half of the 1980's, the average worker in this country 
could not even keep up with the cost of living. But look what happened 
to CEO pay. It skyrocketed dramatically.
  How does this compare to other countries? This chart that we looked 
at in our subcommittee compared executive pay in 10 countries in 1991. 
It showed that same-size companies--we are comparing apples and 
apples--we are looking at chief executive officers of organizations 
with $250 million in annual sales--that executive pay for American 
companies of that size generally was twice or more as much as 
executives in other countries.
  The pay gap between the CEO and the worker in this country is now 150 
times, according to ``Business Week''. When you look at that CEO, and 
look at that average worker in America, the CEO is making 150 times the 
average worker.
  Fifteen years ago it was 35 times. In Germany the pay gap is 23 times 
between the CEO and the average worker. In Japan it is 17 times. J.P. 
Morgan said it should not exceed 20 times, that the chief executive of 
a company should not be making more than 20 times more than the average 
worker of that company. But now that pay gap in America has skyrocketed 
from 35 times, where it was 15 years ago, to 150 times where it is now.
  We had another hearing in 1992. We discovered that one of the most 
important factors that was driving the increase in CEO pay is stock 
options. Over 90 percent of large American corporations pay their CEO's 
with stock options--not exclusively, but they use stock options as part 
of the CEO's pay. Stock options at those companies provide not 5 
percent or 10 percent of the CEO pay, but 30 percent of the CEO pay on 
the average. And when the press reports on the highest paid CEOs in 
this country, the majority of their pay is typically from stock 
options.
  In 1992, of the 10 highest paid CEO's in America, all 10 received 
more than 90 percent of their pay from stock options. The amounts that 
they received from stock options alone for the top CEOs in 1992 ranged 
from $22 million to $126 million that year.
  In 1993, the highest paid CEO received $203 million. That was the 
highest paid CEO in the whole country in 1993. Of the $203 million that 
CEO got, $202 million came from stock options.
  What is incredible about this compensation is that it is stealth 
compensation. It does not show up on the books as a deduction against 
corporate profits. It does not show up as an expense. Unlike all other 
forms of compensation, no exception, stock options are not treated as 
an expense on the company's books. And that is what FASB is proposing 
to change.
  Other forms of compensation, be they performance-based compensation 
or not, be they speculative or not--all other forms of compensation 
show up as an expense on the company's books but not stock options.
  Stock options are stealth compensation. Stock options are taken by a 
company as an expense on their income taxes but do not show up as an 
expense on their annual reports. And the independent accountants of 
this country say they think something is wrong with that. They think 
stock options have value. They think stock options have a cost to the 
company. And they think stock options, like every other form of 
compensation with no exception, should be treated as an expense on the 
company's books. That is what that independent accountants' board 
believes. That is what is in their proposed rule.
  We are going to hear a lot--we already have--about the fact that some 
companies--some companies--use stock options for the average employee. 
And it is true, there are some  companies that do it. Very few, by the 
way, but some companies do. But with few exceptions, stock options 
primarily compensate top corporate executives. Data on the 1,100 
largest companies in this country show that less than 2 percent of them 
issue stock options to any employees below management and only 15 
percent issue them as far down the ladder as middle management. So that 
means that 85 percent of the top U.S. corporations, the 1,100 largest 
companies in America, grant stock options only to their top executives. 
That is the big picture.

  The tail which is wagging this dog is those small companies which 
people refer to, and indeed there are some. But the resolution which is 
before us is not limited to those small companies. The minority of 
small companies issue stock options in this country. The big stock 
option picture is these big 1,100 corporations which issue stock 
options to their top executives and to no one else.
  My good friend from Connecticut has read the names of a number of 
companies which have broadly based stock option plans. Indeed, there 
are some; not many, but there are some. But of the top 1,100, 2 percent 
are the ones which issue stock options to any employees below 
management at all. That is what we have to focus on. Because the 
resolution is not limited to small companies or to new high-tech 
companies or to new starts. That is the argument which is being put 
forward here to argue for a resolution whose scope is way beyond that. 
It goes to all the companies, and most stock options in this country--
most--are by the large companies to their top executives. And that is 
where the main part of the issue lies. If we ignore that and instead 
just focus on high-tech companies or small companies we are going to be 
missing the big picture instead of looking at the big picture.
  Madam President, I said a moment ago that the stock option is the 
only kind of compensation which is not charged to earnings as an 
expense. Let us take a look at the kinds of compensation that are 
charged to earnings as an expense: Signing bonus, salary, annual bonus, 
performance bonus, grant of stock, a performance stock grant.
  For instance, if we say you are, in a company, going to get a certain 
number of shares of stock based on performance--hey, that counts. That 
company has to take a charge to earnings. That is compensation. 
Restricted stock grants, phantom stock grants, stock appreciation 
rights, life insurance, club dues--everything. Every form of 
compensation is charged as an expense to earnings, but not stock 
options. And that is what FASB is saying they want to change.
  That is what this resolution is saying from a perspective of 
Washington, of the U.S. Congress: ``FASB, don't change that. FASB, we 
know more than you do about what represents honest accounting.'' The 
problem is, Madam President, we do not.
  We may all have opinions on it, and I have an opinion on it, as to 
whether or not stock options should be charged to earnings and as to 
whether honest accounting rules should require that stock options be 
treated as all other forms of compensation. But the independent 
accounting board is in a far better position to reach an objective, 
nonpolitical judgment on that issue. If we want our annual statements 
of corporations to represent honest accounting instead of political 
judgments, we better let that independent accounting board be in terms 
of their judgments and not start legislating accounting rules.
  This stock option exception was created by a 20-year-old accounting 
loophole, called Opinion No. 25. It is that loophole which FASB has 
said after 10 years of study and saying they are going to do something 
about it, is finally doing something about it. That loophole was 
created by an organization which was the predecessor to the Financial 
Accounting Standards Board or FASB.
  I think maybe we ought to spend one moment as to what FASB is. They 
are not a Government agency. The most important thing they have going 
for them is that they are not a Government agency. They can be free of 
the kind of political considerations which otherwise is going to go 
into a judgment which should be free of political considerations.
  It was not established by Government. FASB is independent of 
Government and if we are wise, we are going to try to keep it that way. 
They were created by the accounting profession and by the business 
community because those groups saw clearly that honest accounting rules 
are one of the bedrocks of a healthy economy. They knew that while 
individual businesses want to minimize reported costs and maximize 
reported earnings, that rosy scenarios are not what markets need to 
function effectively. What they need is honest financial reporting, and 
that is what FASB was designed to provide and that is what it has been 
providing.
  What the businesses want us to do--and we have heard a lot from the 
businesses--they have come clamoring to this town trying to protect 
this status quo which favors their executives so much. What they want 
Congress to do is to reverse FASB's effort to reform stock option 
accounting.
  Opponents have said that most of the business community opposes this 
change that FASB is proposing, and that is not surprising. It is not 
surprising because of the intense personal involvement of the CEO's in 
this issue. FASB has received more than 400 letters from CEO's opposing 
stock option accounting reform. FASB will also tell you that they have 
never seen that level of involvement by CEO's on any issue until it 
came to their stock options. They never saw that level of involvement 
by the CEO's even when FASB proposed a new earnings charge, a charge 
against corporate earnings for retiree health benefits, a charge that 
dwarfs any of the stock option charges that FASB is contemplating 
today.
  What FASB has been saying, in essence, is that stock options have a 
value; that they have a cost; and that the accounting fiction which 
hides the cost to the company has to end.
  Most of FASB's opponents readily admit that stock options have value 
and that is why executives want stock options. That is why there has 
been such an intense lobbying effort by executives to save their stock 
options.
  Then we are told the six big accounting firms oppose FASB. And 
relative to that issue as to why all of a sudden the accounting firms, 
the big six oppose FASB, I want to quote from some remarks by the chief 
accountant of the Securities and Exchange Commission, a man named 
Walter Schuetze who made a speech to the American Institute of CPA's in 
January of this year.
  Here is what he says:

       It also appears to me, and to other outside observers, that 
     CPA's may have become cheerleaders for their clients on the 
     issue of accounting for stock options issued to employees.

  He went on to say:

       In 1984 and 1985, in response to the Invitation to Comment 
     that began the FASB's reconsideration of the existing 
     accounting rules for stock options granted to employees, 
     all of the then big eight accounting firms, except one, 
     wrote to the FASB supporting, (a), reconsideration of the 
     accounting rules and, (b), a charge to compensation cost/
     expense for all options granted to employees.
       But, in February of 1993, even before the FASB issued its 
     exposure draft on the subject * * * all of the big six 
     accounting firms joined forces with certain members of 
     industry and a group of users to recommend to the FASB that 
     there be no formal recognition for the cost of stock options 
     * * * The big six accounting firms did not, in February 1993, 
     offer an explanation for their change of mind.

  He went on to say, and this is the chief accountant for the SEC:

       I would be the first to say that anyone can change his or 
     her mind. I changed my mind on several accounting issues over 
     the years. But I think the public deserves an acknowledgment 
     of that change of mind by the firms and the reason why.
       Such a change of position, without a corresponding change 
     in the underlying concepts and issues that led the firms * * 
     * initially to support FASB's project, has left some members 
     of the public with the impression that the switch was in 
     response to the fear of losing clients or other forms of 
     retaliation. I do not know if this is true. However, if 
     public companies are pressuring their outside auditors, and 
     the Accounting Standards Executive Committee * * * to take 
     particular positions on financial accounting and reporting 
     issues, and outside auditors are subordinating their views to 
     their clients' views, can the outside auditor community 
     continue to claim to be independent?

  He concluded:

       I make these comments with a heavy heart. As many of you 
     know, these comments do not come from an ivory tower. I lived 
     and worked in the accounting profession for more than 30 
     years. I know the realities of saying no to a client. I know 
     the disappointment some clients express when an auditor makes 
     a decision to support an accounting proposal that may reduce 
     those clients' reported earnings. I know the long and often 
     heated telephone calls and client visits, the emotional 
     strain, and the financial cost that follow such decisions. 
     But I also know the rewards--a clean conscience, not having 
     to worry about losing lawsuits based on the merits, and pride 
     in the profession, the credibility of financial accounting 
     and reporting.
       I hope that the profession and registrants will, through 
     self-restraint, take a fresh look at these independence 
     issues and * * * let nothing stand in the auditor's way of 
     telling the truth as he or she sees it.

  Madam President, it is hard to argue against the proposition, I 
think, that stock options impose costs on the companies at issue. That 
is the second point. The first point is they have a value. That is what 
FASB is saying, stock options have a value. Again, that should not 
shock anybody. If they did not have value, we would not have all the 
CEO's descending on us to try to keep this the way it is in terms of 
accounting rules. That is why they are fighting FASB so hard.
  There is a second proposition FASB is working on, and that is that 
the stock options have a cost to the companies that issue them. That is 
the only reason that companies are permitted to deduct stock option 
compensation from their Federal taxes as a business expense.
  This is the only item that I know of which a company can deduct and 
does deduct from its taxes as a business expense that it does not list 
as a business expense on its books.
  We give them a tax deduction for this because it is a business 
expense, and when it comes to tax time companies argue, oh, it is a 
business expense. We want to deduct the difference between what the 
value of that stock is when exercised and what that so-called strike 
price or option price was. We want to be able to deduct that as a 
business expense. We say go ahead; it is a business expense. And you 
and I pay for it. It is a tax deduction.
  But when it comes to their own books and records at the end of the 
year, they want to maintain the fiction that there is no cost to the 
company. There is no expense, they argue, when it comes to their annual 
report. It is only an expense, they say, when it comes to their income 
tax.
  They cannot have it both ways. It is one or the other. It is either 
an expense for income tax purposes and in terms of their own books, or 
it is neither. It cannot be both.
  What is really interesting here in this regard is a letter that was 
written in 1993 to the Senate Finance Committee by someone who opposes 
stock option reform now, the Biotechnology Industry Organization. The 
Biotechnology Industry Organization opposes what FASB is doing. They do 
not want this to be treated as a charge to earnings. But when they were 
talking about a slightly different issue, when they were trying to keep 
stock options as an expense for income tax purposes, when it came to 
the research and development tax credit evaluation, they took exactly 
the opposite position.
  Madam President, how much time do I have remaining?
  The PRESIDING OFFICER. The Senator's time has just about expired; he 
has 1 second remaining. And then under the previous order, once he 
offers his amendment, he will control 15 minutes of time, and the 
Senator from Connecticut 15 minutes of time.
  So the Senator's time has expired on the first-degree amendment.
  Mr. LEVIN. I thank the Chair.


                           amendment no. 1669

 (Purpose: To express the sense of the Senate regarding the protection 
                       of accounting principles)

  Mr. LEVIN. Madam President, I send the second-degree amendment to the 
desk at this time.
  The PRESIDING OFFICER. The clerk will report the second-degree 
amendment of the Senator from Michigan.
  The assistant legislative clerk read as follows:

       The Senator from Michigan [Mr. Levin] proposes an amendment 
     numbered 1669 to amendment numbered 1668:

       The amendment is as follows:

       At the appropriate place in the amendment, insert the 
     following new section:

     SEC.   . SENSE OF THE SENATE.

       It is the sense of the Senate that--
       (1) the status of the Financial Accounting Standards Board 
     as a private body of independent accounting experts should be 
     respected and safe-guarded; and
       (2) the Congress should not impair the objectivity or 
     integrity of the Financial Accounting Standards Board's 
     decisionmaking process by legislating accounting rules.

  Mr. LEVIN. Madam President, the issue before is us is not whether or 
not stock options are good or bad. As far as I am concerned, they are 
good. I like performance-based pay. I put a whole list of performance-
based pay up here. I think we ought to encourage it, but not at the 
expense of honestly accounting for stock options.
  That is what Warren Buffett, who I think is known to all of us as 
really one of the great entrepreneurs of our age, wrote to the Banking 
Committee. He wrote them that we should not--we should not--be 
reversing FASB. FASB is seeking honest accounting. I wish to read parts 
of his letter. He said that he summarized his views on that subject in 
an annual report of his company, Berkshire Hathaway, and he quotes them 
here.

       The most egregious case of let's-not-face-up-to-reality 
     behavior by executives and accountants has occurred in the 
     world of stock options. The lack of logic is not accidental: 
     For decades, much of the business world has waged war against 
     accounting rulemakers, trying to keep the cost of stock 
     options from being reflected in the profits of the 
     corporations that issue them.
       Typically, executives have argued that options are hard to 
     value and that therefore their costs should be ignored. At 
     other times managers have said that assigning a cost to 
     options would injure small start-up businesses. Sometimes 
     they have even solemnly declared that ``out-of-the-money'' 
     options have no value when they are issued.

  He says:

       I see this line of reasoning as offering exciting 
     possibilities to American corporations for instantly 
     improving their reported profits. For example, they could 
     eliminate the cost of insurance by paying for it with 
     options. So if you're a CEO and subscribe to this ``no cash-
     no cost'' theory of accounting, I'll make you an offer you 
     can't refuse: Give us a call at Berkshire and we will happily 
     sell you insurance in exchange for a bundle of long-term 
     options on your company's stock.
       Shareholders should understand that companies incur costs 
     when they deliver something of value to another party and not 
     just when cash changes hands. Moreover, it is both silly and 
     cynical to say that an important item of cost should not be 
     recognized simply because it can't be quantified with 
     pinpoint precision. Right now, accounting abounds with 
     imprecision. After all, no manager or auditor knows how long 
     a 747 is going to last, which means he also does not know 
     what the yearly depreciation charge for the plane should be. 
     No one knows with any certainty what a bank's annual loan 
     loss charge ought to be. And the estimates of losses that 
     property-casualty companies make are notoriously inaccurate.
       Does this mean that these important items of cost should be 
     ignored simply because they can't be quantified with absolute 
     accuracy? Of course not. Rather, these costs should be 
     estimated by honest and experienced people and then recorded. 
     When you get right down to it, what other item of major, but 
     hard-to-precisely-calculate cost--other, that is, than stock 
     options--does the accounting profession say should be ignored 
     in the calculation of earnings?

  He said:

       Instead, as the debate about stock option accounting has 
     gone forward, ``sweep-the-costs-under-the-rug'' proponents 
     have argued fervently for disclosure--for the presentation of 
     all relevant information about options in the footnotes to 
     the financial statements, rather than in the statements 
     themselves * * *
       This approach, so the argument proceeds, is especially 
     needed for young companies: They will find new capital too 
     expensive if they must charge against earnings the full 
     compensation costs implicit in the value of the options they 
     issue. In effect, the people making this argument want 
     managers at those companies to tell their employees that the 
     options given them are immensely valuable while they 
     simultaneously tell the owners of the corporation that the 
     items are cost-free. This financial schizophrenia, so it is 
     argued, fosters the national interest, in that it aids 
     entrepreneurs and the start-up companies we need to 
     reinvigorate the economy.

  He goes on to say:

       Let me point out the absurdities to which that line of 
     thought leads. For example, it is also in the national 
     interest that American industry spend significant sums on 
     research and development. To encourage business to increase 
     such spending we might allow these costs, too, to be recorded 
     only in the footnotes so that they do not reduce reported 
     earnings. In other words, once you adopt the idea of pursuing 
     social goals by mandating bizarre accounting, the 
     possibilities are endless.
       Indeed, I would argue that the national interest theory is 
     not only misguided, but wrong. True international 
     competitiveness is achieved by reducing costs, not ignoring 
     them. Over time, capital markets will also function more 
     rationally when logical and even-handed accounting standards, 
     rather than the ``feel-good'' variety, are followed.

  Madam President, I ask unanimous consent that I may put the entire 
letter of Warren Buffett to the Banking Committee, dated October 18, 
1993, into the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                      Berkshire Hathaway Inc.,

                                      Omaha, NE, October 18, 1993.
     Hon. Christopher Dodd,
     Chairman, Securities Subcommittee of Committee on Banking, 
         Housing, and Urban Affairs, Senate Office Building, 
         Washington, DC.
       Dear Mr. Chairman: I regret that I will not be able to 
     attend your subcommittee meeting on October 21.
       Could I have appeared there, I would have wished to make 
     certain points, which I will distill here. First among these 
     is the fact that I do not object to the intelligent use of 
     stock options. I have often voted for their issuance, both as 
     a director and as a substantial owner of the issuing 
     corporations making use of them.
       I do, however, object to the improper stock-option 
     accounting now practiced. I summarized my views on that 
     subject in the 1992 Annual Report of Berkshire Hathaway and I 
     would like to repeat those comments here:
       Managers thinking about accounting issues should never 
     forget one of Abraham Lincoln's favorite riddles: ``How many 
     legs does a dog have if you call his tail a leg?'' The 
     answer: ``Four, because calling a tail a leg does not make it 
     a leg.'' It behooves managers to remember that Abe's right 
     even if an auditor is willing to certify that the tail is a 
     leg.
       The most egregious case of let's-not-face-up-to-reality 
     behavior by executives and accountants has occurred in the 
     world of stock options. The lack of logic is not accidental: 
     For decades, much of the business world has waged war against 
     accounting rulemakers, trying to keep the cost of stock 
     options from being reflected in the profits of the 
     corporations that issue them.
       Typically, executives have argued that options are hard to 
     value and that therefore their costs should be ignored. At 
     other times managers have said that assigning a cost to 
     options would injure small start-up businesses. Sometimes 
     they have even solemnly declared that ``out-of-the-money'' 
     options (those with an exercise price equal to or above the 
     current market price) have no value when they are issued.
       Oddly, the Council of Institutional Investors has chimed in 
     with a variation on that theme, opining that options should 
     not be viewed as a cost because they ``aren't dollars out of 
     a company's coffers.''; I see this line of reasoning as 
     offering exciting possibilities to American corporations for 
     instantly improving their reported profits. For example, they 
     could eliminate the cost of insurance by paying for it with 
     options. So if you're a CEO and subscribe to this ``no cash-
     no cost'' theory of accounting, I'll make you an offer you 
     can't refuse: Give us a call, at Berkshire and we will 
     happily sell you insurance in exchange for a bundle of long-
     term options on your company's stock.
       Shareholders should understand that companies incur costs 
     when they deliver something of value to another party and not 
     just when cash changes hands. Moreover, it is both silly and 
     cynical to say that an important item of cost should not be 
     recognized simply because it can't be quantified with 
     pinpoint precision. Right now, accounting abounds with 
     imprecision. After all, no manager or auditor knows how long 
     a 747 is going to last, which means he also does not know 
     what the yearly depreciation charge for the plan should be. 
     No one knows with any certainly what a bank's annual loan 
     loss charge ought to be. And the estimates of losses that 
     property-casualty companies make are notoriously inaccurate.
       Does this mean that these important items of cost should be 
     ignored simply because they can't be quantified with absolute 
     accuracy? Of course not. Rather, these costs should be 
     estimated by honest and experienced people and then recorded. 
     When you get right down to it, what other item of major but 
     hard-to-precisely-calculate cost--other, that is, than stock 
     options--does the accounting profession say should be ignored 
     in the calculation of earnings?
       Moreover, options are just not that difficult to value. 
     Admittedly, the difficulty is increased by the fact that the 
     options given to executives are restricted in various ways. 
     These restrictions affect value. They do not, however, 
     eliminate it. In fact, since I'm in the mood for offers, I'll 
     make one to any executive who is granted a restricted option, 
     even though it may be out of the money: On the day of issue, 
     Berkshire will pay him or her a substantial sum for the right 
     to any future gain he or she realizes on the option. So if 
     you find a CEO who says his newly-issued options have little 
     or no value, tell him to try us out. In truth, we have far 
     more confidence in our ability to determine an appropriate 
     price to pay for an option than we have in our ability to 
     determine the proper depreciation rate for our corporate jet.
       It seems to me that the realities of stock options can be 
     summarized quite simply: If options aren't a form of 
     compensation, what are they? If compensation isn't an 
     expense, what is it? And, if expenses shouldn't go into the 
     calculation of earnings, where in the world should they go?
       With over six months having passed since those questions 
     were posed, I have had no one heap answers upon me.
       Instead, as the debate about option accounting has gone 
     forward, ``sweep-the-costs-under-the-rug'' proponents have 
     argued fervently for disclosure--for the presentation of all 
     relevant information about options in the footnotes to the 
     financial statements, rather than in the statements 
     themselves. In that manner, they say, investors can be 
     informed about the costs of options without these costs 
     actually hurting net income and earnings per share.
       This approach, so the argument proceeds, is especially 
     needed for young companies: They will find new capital too 
     expensive if they must charge against earnings the full 
     compensation costs implicit in the value of the options they 
     issue. In effect, the people making this argument want 
     managers at those companies to tell their employees that the 
     options given them are immensely valuable while they 
     simultaneously tell the owners of the corporation that the 
     options are cost-free. This financial schizophrenia, so it is 
     argued, fosters the national interest, in that it aids 
     entrepreneurs and the start-up companies we need to 
     reinvigorate the economy.
       Let me point out the absurdities to which that line of 
     thought leads. For example, it is also in the national 
     interest that American industry spend significant sums on 
     research and development. To encourage business to increase 
     such spending, we might allow these costs, too, to be 
     recorded only in the footnotes so that they do not reduce 
     reported earnings. In other words, once you adopt the idea of 
     pursuing social goals by mandating bizarre accounting, the 
     possibilities are endless.
       Indeed, I would argue that the ``national-interest'' theory 
     is not only misguided, but wrong. True international 
     competitiveness is achieved by reducing costs, not ignoring 
     them. Over time, capital markets will also function more 
     rationally when logical and even-handed accounting standards, 
     rather than the ``feel-good'' variety, are followed.
       Back in 1937, Benjamin Graham, the father of Security 
     Analysis and, in my opinion, the best thinker the investment 
     profession has ever had, wrote a satire on accounting. In it, 
     he described the gimmicks that companies could employ to 
     inflate reported earnings, even though economic reality 
     changed not at all. Among Graham's most hilarious 
     suggestions--because the thought seemed so far fetched--was a 
     proposition that all employees of a company be paid in 
     options. He pointed out that this arrangement would eliminate 
     all labor costs (or, more precisely, eliminate the need to 
     record them) and do wonders for the bottom line.
       Today, in the world of stock options, we have life 
     imitating satire. So far, of course, companies have largely 
     substituted option compensation for cash compensation only 
     when paying managers. But there is no reason that this 
     substitution can't spread, as corporate executives catch on 
     to the possibility of inflating earnings without actually 
     improving the economics of their businesses.
       One close-to-home example, involving Berkshire Hathaway and 
     its 20,000 employees: I would have no problem inducing each 
     of them to accept an annual grant of out-of-the-money options 
     worth $3,000 at issuance in exchange for a $2,000 reduction 
     in annual cash compensation. Were we to effect such an 
     exchange, our pre-tax earnings would improve by $40 million--
     but our shareholders would be $20 million poorer. Would 
     someone care to argue that would be in the national interest?
       Many years ago, I heard a story--undoubtedly apocryphal--
     about a state legislator who introduced a bill to change the 
     value of pi from 3.14159 to an even 3.0 so that mathematics 
     could be made less difficult for the children of his 
     constituents. If a well-intentioned Congress tries to pursue 
     social goals by mandating unsound accounting principles, it 
     will be following in the footsteps of that well-intentioned 
     legislator.
           Sincerely,
                                                Warren E. Buffett.

  Mr. LEVIN. Also, Madam President, I ask unanimous consent that a list 
of 70 members of the academic community that are supporting the 
following statement be inserted in the Record at this time. The 
statement is as follows:

       Stock options have value; they impose a cost on companies 
     that issue them; and the cost of stock option compensation 
     ought to be charged to corporate earnings.

  Madam President, I also would ask unanimous consent that a letter 
from the AFL-CIO in opposition to the Leiberman amendment and in 
support of my second-degree amendment be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                     Stock Option Accounting Reform

       The following members of the academic community endorse 
     this statement:

       ``Stock options have value; they impose a cost on companies 
     that issue them; and the cost of stock option compensation 
     ought to be charged to corporate earnings.''

     Professor Shannon W. Anderson, University of Michigan
     Professor Rick Antle, Yale University
     Professor Paul Bahnson, University of Montana
     Professor Ran Barniv, Kent State University
     Professor Mary E. Barth, Harvard University
     Professor Vic Bernard, University of Michigan
     Former President Derek Bok, Harvard University
     Professor Wayne Boutell, University of California at Berkeley
     Professor Bill Bruns, Harvard University
     Professor John C. Burton, Columbia University
     Professor Richard Buxbaum, University of California at 
         Berkeley
     Professor Alan Cerf, University of California at Berkeley
     Professor Bill Collins, University of North Carolina
     Professor Julie Collins, University of North Carolina
     Professor Daniel W. Collins, University of Iowa
     Professor Graef Crystal, University of California at Berkeley
     Professor Bala Dharan, Rice University
     Professor Mel Eisenburg, University of California at Berkeley
     Professor John A. Elliott, Cornell University
     Professor Marc Epstein, Harvard University
     Professor David Fetyko, Kent State University
     Professor Tom J. Frecka, University of Notre Dame
     Professor John R. Hand, University of North Carolina
     Professor Bill Holder, University of Southern California
     Professor Charles Horngren, Stanford University
     Professor Robert Hoskin, University of Connecticut
     Professor Gene A. Imhoff, University of Michigan
     Professor Sanjay Kallapur, University of Arizona
     Professor Bob Kaplan, Harvard University
     Professor David Kirch, Kent State University
     Professor Don Kirk, Columbia University
     Professor Richard Lambert, Stanford University
     Professor Wayne R. Landsman, University of North Carolina
     Professor Harold Langenderfer, University of North Carolina
     Professor John Larsen, University of Southern California
     Professor Wayne Lee, Kent State University
     Professor Kenneth Lehn, University of Pittsburg
     Professor Baruch Lev, University of California at Berkeley
     Professor Louis Lowenstein, Columbia University
     Professor Terry Marsh, University of California at Berkeley
     Professor Maureen F. McNichols, Stanford University
     Professor Ken Merchant, University of Southern California
     Professor George Milkovich, Cornell University
     Professor Merton Miller, Nobel Laureate in Economics, 
         University of Chicago
     Professor Paul B.W. Miller, University of Colorado
     Professor Paul Munter, University of Miami in Florida
     Professor R.D. Nair, University of Wisconsin
     Professor Charles O'Reilly, Stanford University
     Professor Paul Pacter, University of Connecticut
     Professor Krishna Palepu, Harvard University
     Professor Michael Pearson, Kent State University
     Professor Steven Penman, University of California at Berkeley
     Professor Robert W. Rouse, College of Charleston in South 
         Carolina
     Professor Doug A. Shackelford, Stanford University
     Professor John K. Simmons, University of Florida
     Professor Abbie Smith, University of Chicago
     Professor David Solomons, Wharton School, University of 
         Pennsylvania
     Professor Ray G. Stephens, Kent State University
     Professor Amy Sweeney, Harvard University
     Professor Brett Trueman, University of California at Berkeley
     Professor Jim Wahlen, University of North Carolina
     Professor Wanda Wallace, College of William & Mary
     Professor Ross Watts, University of Rochester
     Professor Jerry Weygandt, University of Wisconsin
     Professor Guy Weyns, Harvard University
     Dean Doyle Williams, University of Arkansas
     Professor Mark Wolfson, Stanford University
     Professor David Wright, University of Michigan
     Professor Stephen A. Zeff, Rice University
     Professor Linda Zucca, Kent State University
                                  ____

                                                          AFL-CIO,


                                    Department of Legislation,

                                      Washington, DC, May 3, 1994.
       Dear Senator: During consideration of S. 783, the Fair 
     Credit Reporting Act, the Senate will consider an amendment 
     by Senator Lieberman to prohibit the Financial Accounting 
     Standards Board (FASB) from developing accounting rules that 
     would charge employee stock options as a charge against 
     earnings. FASB was created in 1973 as a private-sector group 
     to develop accounting standards for the securities industry.
       The AFL-CIO opposes the Lieberman amendment because it is 
     an attempt to preempt the ability of FASB to develop 
     objective accounting rules.
       While this issue is almost exclusively a matter of concern 
     for highly compensated executives who receive stock options, 
     it does affect rank and file workers. As shareholders of 
     corporations through our pension plans, the unions of the 
     AFL-CIO are unable to obtain an adequate financial picture of 
     corporations that use stock options extensively. We approach 
     this issue from the perspective of union fund trustees whose 
     investments and proxy voting responsibilities are impacted by 
     the quality and appropriateness of the financial statement 
     disclosure as well as from the perspective of union members 
     who need to be aware of the financial, health and liabilities 
     of the firms for which they work. The AFL-CIO has contacted 
     FASB offering its suggestions in this complex area. However, 
     we believe that FASB should be able to complete its own 
     recommendation without being swayed by Congress.
       Therefore, the AFL-CIO opposes the Liberman amendment which 
     would undermine the integrity of the FASB process.
           Sincerely,
                                              Robert M. McGlotten,
                                                         Director.

  Mr. LEVIN. Madam President, I reserve the remainder of my time.
  Mr. LIEBERMAN addressed the Chair.
  The PRESIDING OFFICER (Ms. Mikulski). The Senator from Connecticut.
  Mr. LIEBERMAN. Madam President, I thank the Chair.
  Madam President, it is unusual for me to be in the position of 
arguing against the Senator from Michigan who I normally consider to be 
such a rational and objective person. I find myself not feeling this 
way about his arguments in this particular case.
  Madam President, the Senator from Michigan has talked at great length 
about the compensation of chief executives of companies and the way in 
which that compensation in so many cases has been rising dramatically 
and whereas the compensation of the average worker has not been rising. 
Of course, I share his anger at that.
  Obviously, we understand that the public is angry about that 
disparity as well. And some of the levels of compensation being 
reported are enormous. It is hard to imagine $100 million or $200 
million a year. But it is very important to say that this debate is not 
about the compensation of chief executive officers. I mean the 
Financial Accounting Standards Board itself, which the Senator from 
Michigan is here to protect in that sense, or at least protect the 
proposed rule in this case, has stated over and over again that their 
rule on stock options is not about chief executive officer pay. They 
are concerned, as we all should be, about the integrity and 
comparability of financial statements so that investors can make 
informed decisions.
  If we are concerned about chief executive officer pay, then this is 
not the debate to work out that concern. Obviously, any Member is free 
to speak regardless of the particular subject. But to do anything about 
it probably would require a look at the Tax Code, not at the generally 
accepted accounting principles issued by the FASB.
  Accounting principles need to reflect neutrality in reporting 
financial information, not policy judgments such as have been the 
subject of the statement of the Senator from Michigan. The way any of 
us feel about executive pay is a policy judgment, a value judgment, and 
should not find its way into an accounting principle issued by the 
Financial Accounting Standards Board.
  Madam President, I want to make clear again. The Senator from 
Michigan has talked about the top 1,100 companies, the largest 
companies, and only 2 percent of them giving stock options. But this 
denies the chart that I referred to earlier which agrees with part of 
what he said. But that is only part of the picture. In companies of 
over 5,000, 4 percent of them actually issued stock options to all of 
their employees. But look at these companies. The Senator from Michigan 
referred to 1,100 companies. Over 3 million companies in this country 
have stock. And look at this bar here. Companies with less than 100 
employees that issue stock options give them to 90 percent of the 
workers; 9 out of 10 workers in those startup companies. That involves 
an enormous number of employees; hundreds of thousands, I would say.
  Take all the companies offering stock options. Let us go beyond the 
top largest 1,100. Of all the companies offering stock options, 35 
percent of those give them to all employees. Only 7 percent of the 
companies issuing stock options only give them to senior managers. So 
let us get the full picture here.
  In terms of our concern about the compensation, the pay of the chief 
executive officers, and our complementary concern about the fact that 
so many middle-class workers in this country have not seen real wages 
going up, the irony of the position being taken by FASB, and my friend 
from Michigan, is that stock options are one of the few great 
opportunities that middle-class workers have to break out of the cycle 
of stagnating real wages, to own a piece of the company, basically to 
make more money, to put a little bit away, to buy the home, to send the 
kids to college, to have a retirement nest egg, and to go out and start 
a new business of their own. Look at Wendy's. The great Wendy's gives 
it to employees all the way down to the people working at the counter.
  There was a remarkable event out in California in Silicon Valley 3 or 
4 weeks ago where more than 4,000 middle-management, middle-class and 
lower employees came out, would you believe it, Madam President, to a 
rally for stock options. There ought to be a paragraph in some economic 
or political history of America for that event. And why? Because they 
know how important they are.
  I went through one of the companies a while ago. I stopped the 
workers and asked if stock options matter. ``Sure do.''
  ``What did you do with them?''
  ``Bought a new house, bought a new car.''
  So the irony is here, while we may rail about CEO compensation, stock 
options really primarily benefit middle-class workers and lower in 
companies.
  Third, on the whole question of accounting, the Senator from Michigan 
has listed the series of charges that are taken against earnings. But 
the difference between those and stock options is that they can be 
valued on the occasion on which they are granted. Stock options cannot. 
If stock options could be valued on the date on which they are granted, 
they would have been on that list. There would have been no argument 
here.
  Stock options are like a lawsuit filed against a company. The lawsuit 
is disclosed in the report of the company but is not valued. Because 
how can we value a lawsuit until a judgment is reached or an agreement 
is negotiated? And the same is true of stock options. They cannot be 
valued on the date on which they are granted because nobody knows 
whether they are worth anything, let alone what they are worth.
  Let me go back to something the Senator from Michigan said about 
politics. Again, I want to quote from the American Institute of 
Certified Public Accountants, a nonpolitical group. These are the pros. 
Let us listen to what they say.

       Since stock options are nontransferable and cannot be 
     traded on any market, there is no objective market value that 
     can be readily determined for them. Models that attempt to 
     assign a value to a stock option are based on numerous 
     assumptions and projections, and are of such a nature that 
     they are too complex and unreliable.

  That is not any Member of the Senate. That is not any corporate 
executive. That is the American Institute of Certified Public 
Accountants.
  Madam President, I am not going to object or oppose the second-degree 
amendment offered by the Senator from Michigan because this Senator 
respects and prefers the independence of FASB, the Financial Accounting 
Standards Board.
  And my hope is that they will act in a way here with regard to this 
wrongheaded proposed rule that they will withdraw it, to amend it.
  In saying that, though, I do want to remind the Senator from Michigan 
of something that happened. And I share the sentiments that he 
expressed on an earlier occasion, January 28, 1993, not so long ago, in 
introducing S. 259 in this 103d session of Congress. The Senator from 
Michigan said:

       It is not the ideal course for Federal legislation to 
     require the promulgation of specific accounting rules. My 
     preference is, as I have stated many times, is for FASB or 
     the SEC to take the action needed on their own. But FASB, 
     while conceding that the issue must be addressed, has left it 
     unaddressed for a decade. That is why I am introducing this 
     bill today.

  Then the Senator indicates that FASB may be taking action. Then he 
comes back and concludes:

       But if FASB again fails to act, and the SEC again fails to 
     step in, I--

  The Senator from Michigan----

     will be back asking my colleagues to support this bill as the 
     only option left to us.

  So it is in that spirit that I will support the second-degree 
amendment, knowing that clearly the best of all situations is for the 
Financial Accounting Standards Board to have its independence 
protected. But if it goes ahead in promulgating an accounting rule that 
has a disastrous affect on the ability of the American economy to raise 
capital, to create jobs, and particularly the ability of some of those 
startups the Senator from California [Mrs. Boxer], referred to, then I 
am going to look back at the statement made by the Senator from 
Michigan on January 28, 1993, and probably act accordingly.
  Mrs. BOXER. Will the Senator yield 2 minutes to me?
  Mr. LIEBERMAN. I am happy to do so.
  Mrs. BOXER. Madam President, I agree with the Senator's decision to 
accept the second-degree amendment of the Senator from Michigan. There 
is nothing inconsistent with the second-degree amendment and the first-
degree amendment, as far as I can tell.
  We all agree that we want FASB to listen--not to us, but to the 
hundreds of thousands of people that they are hearing from. I feel so 
differently from my friend from Michigan, and maybe it is because I 
come from a State where I have seen the entrepreneurial spirit arising 
from men and women who are investing their own funds, who are 
attracting the talent to their companies, because they are able to 
offer, if you will, a piece of the future action of the company to 
these people. So they are involved in the company.
  The Senator from Michigan himself stated, ``I like stock options; 
they are good.'' He said, ``It is not a matter of whether stock options 
are good. I like them. They are good.''
  When you say that, I think you have to take the next step and say if 
you like them and think they are good, then why would you be on the 
opposing side from the Senator from Connecticut and the Senator from 
California? Because we are saying we like stock options, and we think 
they are good. We think they act to attract good people to the startup 
companies and retain them there, where they give their all and feel a 
part of the company, and we may have a rule here that will hurt those 
very same companies.
  I say to my friend from Michigan that I think the large companies can 
always survive. Their bottom line can take a hit of a large stock 
option. But it is the smaller companies that we hurt--companies like 
Shaman Pharmaceuticals and Lisa Conte, who founded that company with a 
couple thousand of her own dollars.
  In my closing second, I ask unanimous consent that I may have printed 
in the Record at this time an op ed piece from the Wall Street Journal 
of February 8, 1994, entitled ``A Rule That Stunts Growth.''
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, Feb. 8, 1994]

                       A Rule That Stunts Growth

                        (By J. Carter Beese Jr.)

       All eyes are on the stock market. But while investors look 
     to the Fed, Wall Street analysts and the stars for guidance, 
     perhaps they should pay some attention to a slightly lower-
     profile group: The Financial Accounting Standards Board, or 
     FASB. That's right, the FASB. While the FASB's work doesn't 
     seem as loftly as setting the nation's monetary policy, the 
     practical effect of an accounting rule currently under 
     consideration is just as serious as Friday's rise in the 
     federal funds rate. The hit to investors would be just as 
     predictable.
       At issue are FASB proposals to force companies to expense 
     the value of employee stock options when the options are 
     issued. Criticism of this idea, subject to public hearings 
     next month, has come from all sides. Nevertheless, 
     shareholders and investors may eventually end up joining the 
     FASB as casualties in this conflict.


                           masking true cost

       Why? Because the FASB is committed to rendering its final 
     decision without regard to any of the social, economic or 
     public policy considerations involved. For shareholders and 
     investors, the FASB's failure to consider these nonaccounting 
     factors masks the true cost of its proposals. Unless all the 
     relevant issue are addressed, we may find ourselves paying 
     the price for blindly using the high-cost alternative when a 
     low-cost selection would have performed equally well.
       Since its inception, the Securities and Exchange Commission 
     has maintained ultimate authority over the content of 
     corporate financial statements. In 1973, the SEC began 
     looking to the FASB to establish accounting principles ``with 
     the expectation that the body's conclusions will promote the 
     interests of investors.''
       In the context of the stock-option accounting debate, 
     promoting investors' interests boils down to answering one 
     question: Should the estimated value of employee stock 
     options be charged as an expense against earnings, as 
     proposed by the FASB, or should it be reflected in the notes 
     to the company's financial statements, a compromise suggested 
     by the Big Six accounting firms, the Council of Institutional 
     Investors and the Business Roundtable?
       Our financial markets, of course, value substance over 
     form. Whether deducted from earnings or disclosed in a 
     footnote, the estimated value accorded to the options will be 
     quickly and efficiently analyzed, checked, re-estimated and 
     assigned its appropriate weight, as only our markets can do 
     so well.
       On the other hand, shareholders and the companies in which 
     they invest care a great deal about form, and for good 
     reason. The collateral consequences of the FASB's proposals 
     go far beyond the potential effect on stock prices.
       The charge to income will be based on highly debatable 
     estimates produced by complex option-pricing models. By 
     turning a soft estimate into a hard expense, we will 
     immediately raise the up-front cost of using stock options, 
     even though the real cost to the company--the potential 
     dilutive effect to shareholder equity--remains unchanged. 
     Moreover, in today's hostile legal environment--where class-
     action suits are instantly filed if earnings fall too fast, 
     rise too slowly or remain too steady--the fear of inviting 
     yet more litigation by including ``soft'' information 
     directly on income statements is a very real concern.
       Additionally, employee stock options are a uniquely 
     American phenomenon that allows thousands of U.S. workers to 
     share in their companies' success. As such, employee stock 
     options provide a distinct competitive advantage to U.S 
     companies competing globally for talented employees. The 
     companies and industries most heavily dependent on stock 
     options are also creating the real job growth in our economy. 
     If, to avoid adverse side-effects, U.S. companies limit their 
     use of stock options, we all lose.
       Faced with these arguments, the FASB's rebuttal is simple: 
     When it comes to accounting principles, economic consequences 
     be damned; the truth will set investors free. But the truth 
     be told, finding the true value of stock options is an 
     impossible task; and by using estimates, the FASB is not 
     empowering investors with more credible financial statements, 
     only theoretically improved ones.
       The merit of these so-called improvements is not clear. 
     Option-pricing models use complicated formulas based on 
     various assumptions, including predictions on interest rates 
     and stock volatility 10 years into the future and produce 
     widely divergent results. The FASB hopes its proposals will 
     enhance the comparability of earnings among companies; but 
     achieving this limited goal is doubtful when the estimates 
     underlying earnings lack comparability.
       For example, compensation consultants reportedly estimated 
     the current value of the options package provided to Kodak's 
     new CEO last December at between $13 million and $17 million, 
     a range of 30%. If this range exists for options on Kodak, a 
     mature company with an established trading history and 
     actively traded options for its stock, imagine the range for 
     a new high-tech company in a new industry with no existing 
     market history or options markets. The estimated value of the 
     latter company's options would be all over the board--and, if 
     recorded as an expense, would render its earnings meaningless 
     to investors for comparative purposes.
       Moreover, its unlikely that the FASB's actions are needed 
     to curb excessive executive salaries, as others argue. No pay 
     package goes unnoticed under the SEC's copious new executive 
     compensation disclosures, and by linking pay to performance, 
     stock options reward executives only if shareholders win too.


                          footnotes would work

       The bottom line is that by using footnote disclosures, 
     investors will receive the same information that the FASB 
     seeks to present. More important, the income statement will 
     not reflect guesstimates of option values, and the damaging 
     side-effects of the FASB's proposals will be eliminated. All 
     with no discernible harm to shareholders and investors.
       Yet the FASB is unable to fully evaluate this alternative 
     approach. As it recently admitted at oversight hearings 
     before the SEC, the FASB lacks the competence to judge 
     nonaccounting issues, and therefore does not consider them 
     when reaching its conclusions.
       Promoting investors' interests demands that we not blindly 
     derail the engine of growth that employee stock options so 
     clearly represent. For everyone's sake, the FASB should amend 
     its proposals, or the SEC should act now to avert a 
     disastrous train wreck.
  Mrs. BOXER. Reading four simple sentences, it says.

       * * * the FASB is committed to rendering its final decision 
     without regard to any of the social, economic, or public 
     policy considerations involved.

  I agree with that. It is up to us to listen to the people back home, 
not to be isolated here in Washington. I found out about this issue 
from the working people back home.
  It goes on to say:

       * * * employee stock options are a uniquely American 
     phenomenon that allows thousands of U.S. workers to share in 
     their company's success.

  Let us not blindly allow FASB to derail the engine of growth that 
employee stock options so clearly represent.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. LEVIN. I yield 5 minutes to the Senator from Oklahoma [Mr. 
Boren].
  The PRESIDING OFFICER. The Senator from Oklahoma [Mr. Boren], is 
recognized.
  Mr. BOREN. I thank my colleague from Michigan. I rise in support of 
the amendment of the Senator from Michigan. First of all, I commend him 
for the leadership he has shown on the issue of executive compensation 
year after year after year.
  He has made sure that those stockholders who own the companies know 
exactly the compensation that is being paid to those that are operating 
those companies. After all, these companies belong to the shareholders, 
and they should have that information in a clear form and in a form 
that is understandable to them.
  In some cases in the past, the levels of compensation to some CEO's 
in this country have been far out of line with the ratios of 
compensation, compared to the compensation of employees in other 
countries. That has a potential impact on the productivity and 
performance of American companies. But executive compensation is not 
the issue here.
  The issue is whether or not we shall have an independent 
decisionmaking process by FASB or not. That is the issue. Should 
Congress begin now by applying pressure through a sense-of-the-Congress 
resolution on FASB while it is undertaking an independent 
decisionmaking process? I think it is very important that we have an 
independent process.
  Both the past Chair of the SEC, Richard Breeden, and the current 
Chair, Arthur Levitt, strongly state that they support an independent 
FASB.
  Breeden said:

       The purpose of accounting standards is to assure that 
     financial reporting is presented in a way that enables 
     decisionmakers to make informed judgments. To the extent that 
     accounting standards are subverted to achieve objectives 
     unrelated to a fair and accurate presentation, they fail in 
     their purpose.

  On January 10, Arthur Levitt, the current Chairman wrote a letter to 
me and four of my colleagues urging that Congress respect the 
independence of FASB.
  In that letter he wrote:

       It certainly is appropriate for Congress to have an 
     interest in accounting issues, particularly one that may have 
     far-reaching implications such as the accounting for employee 
     stock options. * * * However, I believe that it is 
     inappropriate for Congress to prescribe accounting standards 
     through legislation. * * * I am concerned that if the FASB's 
     agenda is limited to those projects that meet 
     congressionally-favored goals, then the process may no longer 
     be perceived as standards setting by an independent body 
     within the accounting profession.

  That is what we are involved in here. Should Congress be inserting 
itself into that independent process, or should we maintain and protect 
the integrity and independence of this process?
  The FASB is not moving at this point in some precipitous fashion. 
They have circulated an exposure draft; they are conducting field 
tests, and they are in the process of conducting public hearings. The 
draft contemplates a 3-year period of disclosing the value of stock 
option compensation before any expense is recognized in the financial 
statements. They are just talking about disclosure to the stockholders, 
who own the companies.
  I happen to think that in many cases the use of stock options as a 
compensation to executives is a good thing. It aligns the management 
interest more closely and directly with the fortune of the firm and 
with the interest of the shareholders who own that firm, especially in 
companies where we have managers who are not, in general, the real 
owners of these companies.
  But such compensation is not free to a firm, and it should be 
accounted for accurately. Warren Buffett, one of the outstanding 
business leaders in this country, supports that idea because he said:

       Companies incur costs when they deliver something of value 
     to another party and not just when cash changes hands.

  Business Week, the Washington Post, and others, have endorsed 
changing accounting rules to reflect the cost of stock option 
compensation. Whether we favor this change ultimately or not is really, 
here again, not the issue. The issue is whether or not we are going to 
inject ourselves and interfere right now in what has been an 
independent, professional, very thoughtful process that does not even 
contend that we will reach a resolution of the issue for 3 more years.
  Madam President, I think it is improper for us to inject ourselves 
into this matter at this point. I think the Senator from Michigan is 
absolutely right. To all of those who have an interest in how we 
provide executive branch compensation, how it fits into the economy 
interests of this country, how it impacts the interest of those who own 
the companies, the shareholders, I think we should all step back and 
look at what is being proposed here, and that is interference with a 
process that should be independent. Let us wait for FASB to finish and 
wait until we see what methodology they come up with for evaluating and 
placing a value on stock options. Let us let the 3 years run for 
reviewing the information for the public, and then we can be in a 
position to evaluate the results. Let us not intrude into the 
independence of this process. Now let us support the Levin amendment.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Chair wishes to advise the Senator from Michigan that he has 2 
minutes and 53 seconds remaining, and to the Senator from Connecticut 
that he has 1 minute and 34 seconds remaining.
  Who seeks time?
  Mr. LEVIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Michigan is recognized.
  Mr. LEVIN. Madam President, our good friend from California asked the 
question: If stock options are good why not reverse FASB? The answer is 
a lot of things are good. Our research and development spending is 
good, but surely that should be shown as an expense on the company's 
books.
  If the test of what is an expense shown on the books is what is good 
and if it is good it should not be shown, then most of the expenses 
that a company undertakes are not going to be reflected on the books 
and we are not going to have honest accounting rules.
  This vote today on the Lieberman amendment is about whether or not we 
are going to interject ourselves into FASB's effort to have honest 
accounting rules.
  I hope my amendment passes. I think now it will with the support of 
the Senators from Connecticut and California. It should because it says 
we should not legislate.
  But, in addition, after my amendment is adopted, and hopefully it 
will be, we should then defeat the underlying amendment because the 
underlying amendment would say that we, the Congress, know better than 
FASB as to what represents an honest accounting rule when it comes to 
stock options. It is a bad precedent to set. It is a slippery slope to 
begin walking down.
  We should listen to Warren Buffett and, by the way, we should ignore, 
if I may say so, in all friendliness with my good friend from 
Connecticut that chart that has been put up, because that chart is not 
a scientific chart, not a cross-section. The first chart, if the 
Senator will put it up 1 minute, I will explain to him why that left-
hand column as we understand from the people who put the numbers 
together represents all of 36 companies; whereas the right-hand column 
represents 100 companies.
  So on his own chart the left-hand column represents companies with 
under 100 employees, and there are only 36 responses, but of the 
companies that represent over 5,000 employees there are 100 such 
companies that are represented. That is the information we got by 
calling the company that put that together and, of course, they are 
very much opposed to FASB.
  But if the Senator from Connecticut has different information, of 
course, we would be happy to have him provide it.
  In any event, Madam President, I hope my amendment cosponsored by 
Senator Boren is, in fact, adopted and that we then defeat the 
underlying amendment as an improper intrusion in an effort to get 
honest accounting rules because FASB knows better than the U.S. 
Congress as to what represents straightforward accounting.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. LIEBERMAN. Madam President, it is only out of frustration with 
the direction in which FASB has been going on this accounting rule and 
the fear of the sponsors of the amendment that it will result in 
devastating consequences for American companies and workers.
  Look. This chart reasonably reflects the world out there. Can anybody 
argue with the fact that there are many more middle-management workers 
and lower-management workers that are receiving stock options than the 
few people at the top that receive these outrageous amounts of money? 
It is just the fact. Four thousand people in one area of one State come 
out to rally for their stock options. This is one of the great uniquely 
American middle-class benefits, a way for people to create financial 
security for themselves. This proposed FASB rule will devastate that 
benefit, make it hard for small companies to raise capital, make it 
hard for a lot of our people who are out there not working now to get 
the jobs that we all say we want them to get.
  Madam President, the underlying amendment, the amendment that I have 
offered, will make it clear to FASB that there are consequences of 
their accounting rule that so directly affect areas of our economy that 
we, in Congress, must be worried about, that we have to speak out and 
say please withdraw this rule, stay with what you have and let us and 
those like the Senator from Michigan find a more appropriate forum to 
go at their concerns about executive compensation.
  The PRESIDING OFFICER. All time has expired.
  Mr. LIEBERMAN. I thank the Chair.
  Mr. LEVIN. Madam President, I ask for the yeas and nays on my second-
degree amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. Under the previous order, the question occurs 
on amendment No. 1669.
  Mr. LIEBERMAN. Madam President, I ask at this time for the yeas and 
nays on my underlying amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.


                       vote on amendment no. 1669

  The PRESIDING OFFICER. The clerk will now call the roll on the Levin 
amendment No. 1669.
  The legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Massachusetts [Mr. 
Kennedy] and the Senator from Ohio [Mr. Metzenbaum] are necessarily 
absent.
  I also announce that the Senator from Alabama [Mr. Shelby] is absent 
because of illness.
  Mr. SIMPSON. I announce that the Senator from Mississippi [Mr. 
Cochran] is necessarily absent.
  The result was announced--yeas 94, nays 2, as follows:

                      [Rollcall Vote No. 97 Leg.]

                                YEAS--94

     Akaka
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boren
     Boxer
     Bradley
     Breaux
     Brown
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Coats
     Cohen
     Coverdell
     Craig
     D'Amato
     Danforth
     Daschle
     DeConcini
     Dodd
     Dole
     Domenici
     Durenberger
     Exon
     Faircloth
     Feingold
     Feinstein
     Ford
     Glenn
     Gorton
     Graham
     Gramm
     Grassley
     Gregg
     Harkin
     Hatch
     Hatfield
     Heflin
     Helms
     Hollings
     Hutchison
     Inouye
     Jeffords
     Johnston
     Kassebaum
     Kempthorne
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     Mathews
     McCain
     McConnell
     Mikulski
     Mitchell
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Nunn
     Packwood
     Pell
     Pressler
     Pryor
     Reid
     Riegle
     Robb
     Rockefeller
     Roth
     Sarbanes
     Sasser
     Simon
     Simpson
     Smith
     Specter
     Stevens
     Thurmond
     Wallop
     Warner
     Wellstone
     Wofford

                                NAYS--2

     Conrad
     Dorgan
       

                             NOT VOTING--4

     Cochran
     Kennedy
     Metzenbaum
     Shelby
  So the amendment (No. 1669) was agreed to.
  The PRESIDING OFFICER. The distinguished majority leader.
  Mr. MITCHELL. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll to ascertain the 
presence of a quorum.
  The bill clerk proceeded to call the roll.
  Mr. MITCHELL. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Unanimous-Consent Agreement

  Mr. MITCHELL. Madam President, I ask unanimous consent that the 
following be the only remaining first-degree amendments in order to S. 
783----
  The PRESIDING OFFICER. Will the majority leader withhold? I cannot 
hear the Senator's unanimous-consent request.
  The majority leader may proceed.
  Mr. MITCHELL. That second-degree amendments be in order, provided 
they are relevant to the subject matter of the first degree, that no 
motions to recommit be in order, and that upon the disposition of these 
amendments the committee substitute be agreed to, the bill be read a 
third time, and the Senate without any intervening action or debate 
vote on passage of S. 783.
  The amendment are: An amendment by Senator Gorton regarding the 
Seattle SEC office; an amendment by Senator Danforth, a sense of the 
Senate regarding trade subsidies; an amendment by Senator Helms 
regarding regulatory relief; an amendment by Senator Helms regarding 
regulatory relief; an amendment by Senator Helms regarding regulatory 
relief; an amendment by Senator Levin regarding credit card redlining; 
an amendment by Senator Simon regarding privacy protection commission; 
an amendment by Senator Lieberman regarding advance fee loan scam.
  The PRESIDING OFFICER. Is there objection to the request of the 
majority leader? Without objection, it is so ordered.
  Mr. MITCHELL. Madam President, the vote now about to occur will be 
the last vote today.
  Mr. KERRY. Madam President, as this vote should suggest to the 
Financial Accounting Standards Board which promulgates accounting 
standards for the private sector, the Senate has deep concerns about 
its proposal to require companies to amortize the value of stock 
options and deduct them off their earnings statements, with the values 
derived not from current market prices, but from estimates of future 
prices derived by computer models.
  Many of us have been reluctant to wade into this controversy, because 
of our fear of politicizing a process that must aspire to absolute 
clarity and fairness. After all, the day Congress begins devising the 
generally accepted accounting principles is the day they become 
generally unaccepted accounting principles.
  But I have come to oppose FASB's proposal for two overriding reasons, 
the rule's purported benefit to the investing public, and its apparent 
impact on companies. Strictly speaking, FASB's mission is to worry only 
about the first--the benefit of the rule to investors. Those of us in 
elected office must be worried about both. I am not an accountant, but 
I can do figures. I simply cannot see how the FASB rule, as proposed, 
will benefit the investing public.
  Consider, first, that FASB already requires companies to report their 
earnings per share based on a total number of shares that includes all 
the stock options they have granted. Consider also that the SEC now 
requires substantial disclosure to shareholders of the total 
compensation and incentives awarded to the top five executives of each 
firm, including their stock options. Companies must also demonstrate 
how compensation and incentives awarded over time compare to the 
company's financial performance and that of comparable firms. Finally, 
I might add, this Congress capped the deductibility of executive 
compensation at $1 million as part of last year's Budget Act. I have to 
believe that the greater part of the stealth has now been removed from 
what had been an excess of stealth compensation.
  Contrast all this with the mechanics of the proposed FASB rule. 
Companies will have to choose from among six computer models to make 
estimates of the future value of their stock. It seems to me that 
requiring companies to choose between models is, by its nature, a 
requirement that introduces uncertainty into the financial reporting 
process. Then again, even FASB now concedes that the models can produce 
significant variations in expected values from company to company--yet 
another element of uncertainty.
  Thus, it is not clear to me what the investing public gains from the 
PASB rule. Clearly, in granting stock options companies grant something 
that must have value, although they do not represent a cash expense, 
they are not tradeable, and ultimately they have value only if the 
company's stock price goes up--in which case ordinary shareholders 
benefit along with option holders. Stock options must have value, but 
is the FASB rule the way to establish that value?
  In the absence of a clear answer to that question from FASB, we in 
the Congress have more than enough right to ask how the rule will 
affect companies and their workers. Here I fear that, while the rule is 
aimed at larger companies that abused options in years past, it is 
about to hit smaller companies that are creating new jobs in States 
like my own.
  Madam President, in my State, just as in Silicon Valley, stock 
options serve as a fundamental means of financing the start-up of new 
companies. Employees forego salary and benefits in return for stock 
options. In doing so they bind themselves to the firm for a period of 
several years, and commit themselves to the goal of all investors: the 
company's success. Stock options allow the company to reserve 
critically needed cash for other vital needs of a new or emerging 
company: for research and development, for marketing, and for getting a 
new product out the door.
  There is no more compelling testimony to the damage the FASB rule 
will do to these companies than the testimony of the venture capital 
community. After all, apart from company founders it is the venture 
capitalists who provide all or most of the ownership capital for 
emerging companies, so it is the venture capitalists who are giving 
away part of the store when they grant stock options. The venture 
capitalists tell me that the FASB rule will simply make stock options 
more expensive, which means they will be granted less often, which will 
make recruitment of talent more difficult, and which will make the cost 
of starting a company rise.
  Now, this might be acceptable if some greater public purpose were 
served by the FASB rule, such as the provision of a clear benefit to 
the investing public. But as I noted previously, it is difficult to 
find such a benefit in the current FASB proposal.
  To the contrary, the evidence seems compelling that the FASB rule 
will disproportionately affect startups, smaller growth companies, and 
companies in new or breakthrough markets--that is, precisely the 
companies we are relying on in Massachusetts to make up for the 
thousands of jobs lost over the last 5 years. Companies in larger, more 
established, and mature markets will be much less affected, because 
they have financial and stock market track records that will be more 
easily digested by these new stock option pricing models run by 
computer.

  Madam President, I am proud of the steps this Congress has taken to 
support new companies and new jobs during the last 2 years, and I am 
proud that I played a role in taking those steps. We have cut capital 
gains taxes for investments in new companies, we have reformed the 
Small Business Investment Corporation Act, we have strengthened and 
expanded the Small Business Innovation Research Program, we have 
created the Advanced Technology Program, we have increased expensing 
provisions for small business taxpayers, and more.
  The FASB proposal as it currently stands poses a real threat to these 
accomplishments, and all in the name of a standard of accounting purity 
that FASB has great difficulty explaining in simple English. As I have 
stated before, Congress should be in no hurry to dictate to FASB, but 
unless FASB can come up with a better and more defensible proposal on 
stock options, the Securities and Exchange Commission should exercise 
the authority it manifestly possesses and override FASB on its proposed 
stock option rule. In the meantime, in this sense of the Senate, we are 
putting ourselves firmly on record in expressing our concern about 
FASB's approach.
  It is my hope that FASB will take the opportunity provided by this 
vote to consult with industry representatives and develop a more viable 
approach in the days to come, one which unlike the current proposal, 
draws strong consensus and support from those most affected by it.
  Mr. MACK. Madam President, I rise today to support this sense-of-the-
Senate amendment concerning the Federal Accounting Standards Board's 
proposal to change the Generally Accepted Accounting Principle relating 
to employee stock options.
  While most people have a tendency to talk about these things strictly 
in terms of dollars and cents or from an accounting perspective, I 
believe that this issue goes further than that. I had a younger brother 
who died of cancer in 1979. You might be thinking, ``what has this got 
to do with employee stock options?'' I would say that it does relate. 
When Michael was diagnosed with melanoma everyone said that there was 
no cure. At that time if you were diagnosed with melanoma, you were 
going to die; it was just a question of when.
  Dr. Stephen Rosenberg at the National Cancer Institute has done some 
remarkable work in the area of research on melanoma. In fact, in 
certain cases he is experiencing a 40 percent cure on melanoma. While 
this is wonderful progress, I cannot help but think that if there were 
fewer hurdles for high tech companies and if there were fewer 
roadblocks in the way of new companies starting up, would my brother 
have had an opportunity to live?
  There are probably hundreds of thousands of people around our country 
who are looking to the breakthroughs in biotechnology and bioresearch 
for a cure to their fatal illnesses. I believe that research is being 
impeded because of roadblocks, like the one the Federal Accounting 
Standards Board is about to put in place, to the flow of human capital 
into these new businesses. I have been visited by some of the high tech 
companies in Florida who explained that they depend on stock options to 
attract the experts in their field to a newly formed company. These 
companies do not have the ability to pay the talent up front for their 
services and need this tool to compensate for the risk typically 
associated with new businesses.
  This is an important issue for our Nation's startup companies. The 
Federal Accounting Standards Board's proposal has almost universal 
opposition. I urge my colleagues to support this amendment.


                 vote on amendment no. 1668, as amended

  The PRESIDING OFFICER. The question now occurs on amendment 1668, as 
amended. The yeas and nays have been ordered. The clerk will call the 
roll.
  The bill clerk called the roll.
  Mr. FORD. I announce that the Senator from Ohio [Mr. Metzenbaum], is 
necessarily absent.
  I also announce that the Senator from Alabama [Mr. Shelby], is absent 
because of illness.
  Mr. SIMPSON. I announce that the Senator from Mississippi [Mr. 
Cochran], is necessarily absent.
  The PRESIDING OFFICER (Mr. Akaka). Are there any other Senators in 
the Chamber who desire to vote?
  The result was announced--yeas 88, nays 9, as follows:

                      [Rollcall Vote No. 98 Leg.]

                                YEAS--88

     Akaka
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Bradley
     Breaux
     Brown
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Coats
     Cohen
     Coverdell
     Craig
     D'Amato
     Danforth
     DeConcini
     Dodd
     Dole
     Domenici
     Durenberger
     Faircloth
     Feingold
     Feinstein
     Ford
     Glenn
     Gorton
     Gramm
     Grassley
     Gregg
     Harkin
     Hatch
     Hatfield
     Heflin
     Helms
     Hollings
     Hutchison
     Inouye
     Jeffords
     Johnston
     Kassebaum
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Lieberman
     Lott
     Lugar
     Mack
     Mathews
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Nunn
     Packwood
     Pell
     Pressler
     Pryor
     Reid
     Riegle
     Robb
     Rockefeller
     Roth
     Sarbanes
     Sasser
     Simpson
     Smith
     Specter
     Stevens
     Thurmond
     Wallop
     Warner
     Wellstone
     Wofford

                                NAYS--9

     Boren
     Conrad
     Daschle
     Dorgan
     Exon
     Graham
     Levin
     Mitchell
     Simon

                             NOT VOTING--3

     Cochran
     Metzenbaum
     Shelby
  So, the amendment (No. 1668), as amended, was agreed to.
  Mr. BRYAN. Mr. President, I move to reconsider the vote by which the 
amendment was agreed to.
  Mr. MITCHELL. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                          ____________________