[Congressional Record Volume 150, Number 101 (Tuesday, July 20, 2004)]
[House]
[Pages H6001-H6022]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STOCK OPTION ACCOUNTING REFORM ACT
The SPEAKER pro tempore. Pursuant to House Resolution 725 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the consideration of the bill, H.R. 3574.
The Chair designates the gentleman from Iowa (Mr. Latham) as chairman
of the Committee of the Whole, and requests the gentleman from Texas
(Mr. Bonilla) to assume the chair temporarily.
{time} 1156
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 3574) to require the mandatory expensing of stock options granted
to executive officers, and for other purposes, with Mr. Bonilla
(Chairman pro tempore) in the chair.
The Clerk read the title of the bill.
The CHAIRMAN pro tempore. Pursuant to the rule, the bill is
considered as having been read the first time.
Under the rule, the gentleman from Ohio (Mr. Oxley) and the gentleman
from Pennsylvania (Mr. Kanjorski) each will control 30 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
I would like to commend the gentleman from Louisiana (Mr. Baker), the
chairman of the Subcommittee on Capital Markets, Insurance and
Government Sponsored Enterprises, for his great leadership on the Stock
Option Accounting Reform Act. His legislation strikes a significant
compromise between those who believe that expensing options will help
prevent some of the corporate governance abuses we have seen in the
last few years and those who believe that expensing options will harm
our most innovative companies, especially those in the high-tech
industry, but not exclusive to them.
Requiring publicly held companies to record as an expense options
granted to the chief executive and the next four most highly
compensated officers will help preserve broad-based employee stock
options and, at the same time, addresses the corporate governance
concerns voiced by advocates of expensing.
Our most successful enterprises, many of which are small businesses
and venture capital companies, would not be as successful as they are
today but for their ability to attract and retain talented employees by
giving them ownership in that endeavor. Ownership rewards due to one's
personal contribution to a successful enterprise is the ethos of our
capital markets system.
While I have been, and continue to be, a strong supporter of FASB's
independence, I am supportive of the gentleman from Louisiana's
(Chairman Baker) legislation because I believe FASB's proposal, as
currently drafted, would do harm to our most innovative companies.
While I believe that FASB should be separated from the political
process, and I have supported FASB's independence during all of my 20-
plus years here in the Congress, its authority is subject to review by
the Congress.
In extraordinary circumstances, and I believe this is one of those
rare occasions, FASB's rule-making should be halted when its proposal
will do harm to our economy, and I believe that is the case here. The
Congress is ultimately responsible for the economic well-being of this
country. Policies that could create an environment that is hostile to
innovation and entrepreneurship must be reviewed and altered
accordingly.
Therefore, I urge all of my colleagues to support the gentleman from
Louisiana's (Chairman Baker) important legislation.
Mr. Chairman, I reserve the balance of my time.
{time} 1200
Mr. KANJORSKI. Mr. Chairman, I yield myself 6 minutes.
Mr. Chairman, we are unfortunately meeting today to consider the
Stock Option Accounting Reform Act. This bill would begin the process
of repealing the reforms we enacted in the historic Sarbanes-Oxley Act
just 2 years ago. As I repeatedly noted during the Committee on
Financial Services' consideration of these matters, deciding what
should be accounted for and how it should be accounted for is the job
of the Financial Accounting Standards Board, not the Congress.
Nevertheless, I recognize the strong feelings and deep concerns
expressed by the parties on the other side of this contentious issue.
The accounting treatment of stock options has caused significant
controversy for more than a decade and FASB's decision to revisit this
matter has rekindled a fiery debate.
Although I have great sympathy for those individuals in the high-tech
community who have raised considerable reservations about the expensing
of stock options and the effects on business operations and
compensation plans, H.R. 3574 would interfere with FASB's independence.
It could also undermine the credibility of financial reports.
We need to work in Washington, particularly in the wake of recent
accounting scandals, to improve the transparency of financial reporting
statements in order to help average investors make better decisions. A
decade ago, the Congress strong-armed FASB into abandoning an effort to
adopt a rule requiring stock option expensing. We now know that this
retreat helped contribute to a recent financial storm on Wall Street.
In fact, a recent study by economists at Texas A&M found that companies
where CEOs had options equal to 52 times their annual salary were 70
percent more likely to have a restatement than similar-sized companies
in similar industries where CEO had little option wealth.
In considering this bill today, we may, therefore, ultimately allow
history to repeat itself. We would for the first time also be making
the Congress an appeals board for the development of accounting
standards. Support in the business community for mandatory expensing
has increased significantly in the wake of the recent tidal wave of
accounting scandals. A Merrill Lynch study found more than 90 percent
of institutional investors want stock options expensed. This view is
shared by the American Institute of Certified Public Accountants, the
Investment Company Institute, and the Council for Institutional
Investors. Our largest accounting firms have also called for the
expensing of stock options.
In addition, nearly 600 companies have already voluntarily adopted or
are in the process of adopting fair-value expensing of stock options.
Respected corporations like Home Depot, General Motors, General
Electric, Wal-Mart, Microsoft, and Amazon have all decided to treat
stock options as expenses.
[[Page H6002]]
In a recent letter to FASB, Citigroup emphasized its ``strong support
for private sector standard setting'' and ``its opposition to
congressional intervention on the accounting for stock options.''
Furthermore, in recent proxy votes at IBM, Peoplesoft, Hewlett-
Packard, and Texas Instruments, the shareholders of these leading high-
tech companies have voted in favor of stock options expensing.
Moreover, in May the shareholders of Intel approved a proposal asking
the company to expense stock options. This proposal passed with 54
percent of the 5.7 billion votes cast. To date, however, Intel's
management has disregarded the decision of its stockholders.
Numerous consumer groups, including the Consumer Federation of
America, Consumers Union, and Consumer Action, are also supporting the
expensing of stock options. They have determined that the legislation
we are considering would deprive investors of comprehensive and
transparent financial transactions. Many in the labor movement share
these concerns. These entities include the AFL-CIO, the Teamsters, and
AFSCME, among others. Each of these groups has called on us to reject
H.R. 3574.
Additionally, our Nation's leading financial regulators have
previously made the case for options expensing and recently advised us
to preserve FASB's independence. In a recent letter to me, SEC Chairman
Donaldson notes his strong support for an independent and open
standard-setting process for establishing accounting standards.
At a congressional hearing in April, Federal Reserve Chairman Alan
Greenspan said, ``I think the Congress would err in going forward and
endeavoring to impede FASB,'' in its consideration of stock options
expensing rule.
Moreover, leaders on Capitol Hill have already opined on the need to
protect FASB's independence. In a recent op-ed in the Wall Street
Journal, the chairman of the Senate Banking Committee asserted that
Congress should ``stay out of FASB's rulemaking, and let the experts do
their job.'' Because many of his colleagues in the other body on both
sides of the aisle agree with this assessment, this legislation seems
unlikely to become law.
In sum, Mr. Chairman, I agree with the assessments of my esteemed
colleagues, leading regulators, reputable financial experts, concerned
consumer groups, interested labor leaders, and a growing number in the
business community regarding the need to protect FASB's independence.
To strengthen investor confidence and promote the international
convergence of corporate reporting standards, FASB must proceed with
diligence, and without political interference, in its consideration of
a rule proposal on the mandatory expensing of stock options. I urge my
colleagues to reject H.R. 3574.
Mr. OXLEY. Mr. Chairman, I ask unanimous consent that the gentleman
from Louisiana (Mr. Baker) be permitted to control the remainder of my
time for consideration of this bill.
The CHAIRMAN. Is there objection to the request of the gentleman from
Ohio?
There was no objection.
Mr. BAKER. Mr. Chairman, I yield 1 minute to the gentleman from
Washington (Mr. Inslee).
(Mr. INSLEE asked and was given permission to revise and extend his
remarks.)
Mr. INSLEE. Mr. Chairman, I speak in favor of this bill for the
fundamental reason that this protects an extremely successful tenet of
the American innovation economy. I look around my district and what I
see is a collection of companies, 10, 20, 30 employees doing incredible
things and frequently using stock options. These are companies which
may be on the cusp of actually developing a cure for diabetes, a
company with a couple dozen employees which may develop a cure for
stroke, a company with a couple dozen employees that have a solution so
you cannot see muzzle fire from our soldiers' rifles. These type of
companies use this system to bring in talent, and bringing in talent is
absolutely fundamental to the innovation economy of America.
Stock options have been one of the most successful mechanisms to make
sure that when someone has a good idea, they can marry it with good
brains around them who can come in without a paycheck. Let us preserve
and protect the ability to use stock options.
Mr. KANJORSKI. Mr. Chairman, I reserve the balance of my time.
Mr. BAKER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I wish to acknowledge at this time the leadership of
the gentleman from Ohio (Chairman Oxley) on this most important and
difficult matter. Over the course of the past months, the committee has
engaged in numerous hearings and roundtables to discuss the
advisability of FASB's recommendation and to craft the appropriate
remedy given the committee's concerns. The chairman at all times has
been insistent on a balanced analytical process to afford all
stakeholders the ability to be heard.
I certainly would also wish to extend my appreciation to the leader
on the Democratic side, the gentlewoman from California (Ms. Pelosi);
and the gentlewoman from California (Ms. Eshoo), who have been at the
forefront of leading the charge from their perspective on what they
both believe to be an important economic tool for job creation.
Mr. Chairman, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, I yield 4 minutes to the gentlewoman
from California (Ms. Eshoo), a chief sponsor of the bill.
Ms. ESHOO. Mr. Chairman, I thank the gentleman from Pennsylvania (Mr.
Kanjorski) for yielding me this time.
I am very proud to be the lead Democratic sponsor of this bill. My
partner, the gentleman from Louisiana (Mr. Baker), the gentleman from
California (Mr. Dreier) before him, and colleagues from both sides of
the aisle, this is a true bipartisan effort: over 100 cosponsors,
including leadership from the Democratic side, our distinguished
leader, the gentlewoman from California (Ms. Pelosi), as well as from
the Republican side. This is not a partisan issue, nor should it be.
What this debate is about is not simply the grays and the green eye
shade issues of accounting. What stands front and center in this issue
is the American economy and how we continue to spur it. There are three
major ingredients that other countries around the world have come to
understand because they have studied it, and it has been part of our
success: venture capital, the protection of intellectual property, and
stock options. Why stock options? Because it is a magnet that attracts
workers to a company; and with that magnet it is stated, yes, we are
willing to take a risk and make this company grow. And when we do, we
will all share in the rewards. That is intrinsically American.
Now, have there been people who have abused stock options at the top?
Sadly, that was the case. And the Congress stepped in because the SEC
needed us to step in. The SEC did not do what it was supposed to do,
and the Sarbanes-Oxley legislation was passed. So in terms of the
debate, leave the SEC alone, leave the FASB alone, we should not
interfere, we should not step in, that case is absolutely blown by
having adopted Sarbanes-Oxley.
The FASB has put out an accounting standard. They understand that
they have nothing to do with the economy, and they are proud of saying
that. The Congress does have a responsibility for anything that
impinges on our economy. There are institutional investors in this
country that are not interested in individual stakes and shareholders.
That is all right; it is the view that they hold.
So this debate today, and make no mistake about it, listen carefully,
this is about protecting a tool that has paid off for rank-and-file
workers across the country. This is not only about high technology and
biotechnology. In fact, most of the stock option holders' rank-and-file
are outside of those two industries, and they represent 14.6 million
workers in our country.
Now why expense the people at the top? Because they come to their
compensation package differently. Rank-and-file workers do not
negotiate with a board of directors; the top five in the company do.
This is balanced. This is important. This is essential. Do not wreck
one of the most valuable tools that we have in our country today to
expand our economy, to expand new businesses and to have a stake in the
future of America. I urge my colleagues to support H.R. 3574.
[[Page H6003]]
Mr. Chairman, I'm proud to be the lead Democratic sponsor of the
Stock Option Accounting Reform Act, and thank Chairman Baker for his
leadership, moving it through the Financial Services Committee with
such strong support. The legislation is urgently needed to avert the
implementation of new accounting rules that would have a disastrous
impact on American companies, and more importantly, American workers.
The Financial Accounting Standards Board (FASB) has long threatened
to require stock options to be deducted from a company's earnings, and
this bill would prevent FASB from implementing this requirement for
many critical reasons. Mandatory expensing of stock options would have
a terrible impact on companies that rely on options to recruit and
retain the most talented employees. Without stock options, many of
these companies--including some of the most successful high-tech and
biotech firms--would not even exist today.
Stock options have become associated with corporate scandals and
excessive executive compensation, leading to a call for expensing as
the ultimate prescription for these problems. But stock options were
not the cause of the recent corporate accounting scandals, and
eliminating stock options would do nothing to instill corporate
responsibility or accountability. The crimes committed at Enron, Tyco,
and other companies would not have been prevented if expensing was the
accounting rule of the day.
The Sarbanes-Oxley legislation, which I was proud to support, was
passed to prevent future corporate swindles. If companies are forced to
expense stock options, most will drop broad-based option plans because
of the prospect of taking a huge and misleading charge against their
bottom line in accounting statements.
Make no mistake about it. Stock option plans or some other form of
lucrative compensation for senior executives will undoubtedly continue
to be offered. Consider this: Only a small portion of employee-held
options--about 15 percent--are held by corporate management. 14.6
million American workers--13 percent of private-sector workers
nationwide--held stock options in 2002.
It's ironic that many are calling for the expensing of stock options
in order to reign in executive compensation, when expensing stock
options would do little to accomplish this. Rather rank and file
employees would be the ones to lose, because they don't get to
negotiate with a Board of Directors for their compensation package.
H.R. 3574 also answers many of the critics of stock options who
maintain (wrongly) that this compensation is an ``executive perk'' and
a tool to avoid reporting executive salaries. The Stock Option
Accounting Reform Act requires companies to expense options granted to
the CEO and the next four highest paid officers. Small businesses are
exempted from this requirement and cannot be required to expense
options for the 3 years following an initial public offering.
The bill would also enact new disclosure rules for companies who
offer stock options, requiring them to disclose additional information
regarding share value dilution and other stock option-related
information.
Some have also argued that FASB's independence must be protected and
accounting standards--like other technical rules--should not be set by
Congress. While in general this is the case, there are many occasions
when expert bodies fail to fully protect the public interest and it's
incumbent on Congress to step in. For example, the Securities and
Exchange Commission--an independent, expert agency--failed to
adequately protect investors and the public from the corporate scandals
of recent years: Congress stepped in to enact the reforms of Sarbanes-
Oxley.
Recently, a ``determination on drug safety'' was made by the Food and
Drug Administration which found that the morning-after birth control
pill was not safe enough to approve for over-the-counter sale, despite
ample evidence to the contrary. I would hope that if the FDA does not
change its position on the morning-after pill, we will act to overturn
this decision as well.
Even the Chairman of FASB recently acknowledged that the Board has
proceeded too quickly and the implementation of the new expensing rules
may need to be delayed. H.R. 3574 would simply ensure that the rules
are not implemented for at least a year, pending economic impact
studies by the Commerce and Labor Departments.
Given the radical change the new rules would establish and the
potentially devastating impact on employee ownership programs, Congress
has the responsibility to make sure that these rules are appropriate
and implemented responsibly. I urge my colleagues to support this
legislation and protect broad-based employee ownership programs.
Mr. BAKER. Mr. Chairman, I yield 1 minute to the gentlewoman from
California (Ms. Lofgren).
Ms. LOFGREN. Mr. Chairman, the illusion that stock options only
benefit fat-cat corporate executives is just that, an illusion. Fifty-
three percent of companies that offer stock option plans offer them to
all employees. Within the tech sector, 88 percent offer them to all
employees. With start-ups it is even more important. According to the
National Venture Capital Association, more than 70 percent of venture-
backed companies award stock options to all employees.
As my colleague, the gentlewoman from California (Ms. Eshoo), has
noted, this is an essential component to the innovation economy that
really is pulling the entire American economy forward, but that does
not seem to matter to FASB.
{time} 1215
When stock options that have a strike price of $40 are being traded
at $18 and the FASB accounting system accounts for that as a valuable
option, there is something wrong with the standards that they are
using. We need to study this matter and to make sure that in our
efforts to be clear, we do not destroy the tech economy.
Mr. KANJORSKI. Mr. Chairman, I yield 3 minutes to the gentleman from
Ohio (Mr. Gillmor).
Mr. GILLMOR. I thank the gentleman for yielding time.
Mr. Chairman, I rise today in strong opposition to this legislation
and in support of the Kanjorski amendment which is going to be offered
later.
The real issue we are debating today is whether or not we in the
House want to set a dangerous precedent and politicize the process of
setting accounting standards. The Financial Accounting Standards rule
does not in any way, despite the implication of some other statements,
prevent the issuance of stock options. It just says you have to
honestly tell the shareholders what their real cost is.
If we pass this bill and prevent the SEC from adopting FASB's draft
rule, American workers and other investors may invest their pensions
and other retirement incomes in unprofitable companies because they
will continue to be given misleading financial statements.
Under our current accounting standards, companies are allowed to
choose whether or not to expense stock options, and many have chosen
not to report any expense of this compensation, even when they claim
stock option expenses on their tax returns. Stock options are the only
form of compensation that may be omitted from a corporation's financial
statements. The issue is not whether these forms of compensation
provide useful incentives, but whether all of them should be reflected
honestly on company financial records as company expenses.
Objective observers are virtually unanimous in calling for expensing
of stock options. They include Federal Reserve Chairman Alan Greenspan,
Treasury Secretary John Snow, SEC Chairman William Donaldson, Public
Company Accounting Oversight Board Chairman William McDonough, former
SEC Chairman Arthur Levitt, and investor Warren Buffett, who in a July
6, 2004 editorial gave, quote, this bill's opponents an ``A'' for
imagination and a flat-out ``F'' for logic.
It is also supported by the Council of Institutional Investors, the
Investment Company Institute, Financial Services Forum and the Consumer
Federation of America. The FASB standards are about having honest and
not misleading reporting to people who have invested in a company.
I urge my colleagues to oppose this legislation.
Mr. BAKER. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from
New York (Mr. Crowley).
(Mr. CROWLEY asked and was given permission to revise and extend his
remarks.)
Mr. CROWLEY. I thank the gentleman from Louisiana for yielding me
this time.
Mr. Chairman, I rise in strong support of the Stock Option Accounting
Reform Act, and I urge my colleagues on both sides of the aisle to
support this bill without any damaging amendments. This legislation is
a necessary response to proposed damaging regulations by the Financial
Accounting Standards Board which threaten broad-based employee stock
options. This bill will not cloud basic accounting principles as
investors and analysts who are interested in adjusting an issuer's
[[Page H6004]]
income statements for the cost of stock options already have the
necessary information available to them.
This FASB rule will lead to greater confusion for investors as this
rule actually allows corporate accountants to pick and choose their
expensing methods instead of implementing a uniform standard.
This FASB rule will effectively destroy broad-based stock option
plans, plans that have spread real wealth creation among employees as
opposed to the consolidation of wealth at the top of a corporate
pyramid.
The FASB rule hurts the ability of high-tech firms to recruit and
retain good personnel as stock options were and still are used by
start-up and venture capital firms to attract the talent that is needed
when capital is sparse.
Finally, FASB, by definition, does not take economic impacts into
effect when issuing its regulations, meaning they did not take into
consideration the negative effects of this bill when drafting this
rule. This bill also actually allows for transparency at the top, the
top five individuals of a corporation, those who are most at risk in
putting a company in danger when they play around with stock options.
Mr. Chairman, for all those reasons I urge my colleagues to support
this balanced approach to the issue of stock options.
Mr. KANJORSKI. Mr. Chairman, I yield 2\1/2\ minutes to the
gentlewoman from Illinois (Ms. Schakowsky).
(Ms. SCHAKOWSKY asked and was given permission to revise and extend
her remarks.)
Ms. SCHAKOWSKY. Mr. Chairman, I rise today to oppose H.R. 3574, the
so-called Stock Option Accounting Reform Act. The bill will actually
take away the power from the Financial Accounting Standards Board, an
independent agency, to protect investors, pension holders and workers
by requiring corporations to expense stock options.
In the wake of Enron and other corporate scandals, this is the wrong
message to be sending to all those workers and investors who lost their
life savings and retirement security, and it is the wrong policy to
pursue if we want to boost consumer confidence and improve our economy.
We know from all the corporate scandals that have come to light that
accurate and transparent accounting is vital to corporate
accountability and shareholder confidence. Yet the accounting treatment
of stock options allows corporations to continue to distort their true
financial standing.
Stock options make up 80 percent of compensation packages for
corporate managers. In 2003, CEO pay at 350 major U.S. public companies
averaged $8 million, with stock options as the largest component.
Despite those facts, stock options are the only form of compensation
that may be completely absent from corporate financial statements.
H.R. 3574, a supposed compromise from the FASB rule, only counts
stock options given to the top five executives, when calculated using
what Warren Buffett describes as ``fuzzy math,'' in the bottom line but
not those options given to all the other employees.
The special accounting treatment of stock options which this bill
would allow to continue has fueled abuses linked to excessive executive
pay, inflated earnings, dishonest accounting and corporate misconduct.
Nobel prize winner Joseph Stiglitz believes that the absence of stock
option expensing requirements has ``played an important part in the
spread of other forms of financial chicanery.''
A report by a blue-ribbon panel of the Conference Board found that
the current treatment of stock options has fostered a vicious cycle of
increasing short-term pressures to manipulate earnings to bolster stock
price so that those receiving options could cash in, take the money and
run.
FASB is currently working to address this problem, yet Congress with
the passage of this bill will undercut its effort. I would suggest that
we let FASB do its job and oppose this legislation that would eliminate
the possibility of the transparency that stockholders and pension
recipients need.
Mr. Chairman, I rise today to oppose H.R. 3574, the so-called Stock
Option Accounting Reform Act. This bill will take away Financial
Accounting Standard's Bd., FASB's, an independent agency, power to
protect investors, pension holders, and workers by requiring
corporations to expense stock options. In the wake of Enron, and other
corporate scandals, this is the wrong message to be sending to all
those workers and investors who lost their lives' savings and
retirement security, and it is the wrong policy to pursue if we want to
boost consumer confidence and improve our economy.
We know from all the corporate scandals that have come to light that
accurate and transparent accounting is vital to corporate
accountability and shareholder confidence. Yet, the accounting
treatment of stock options allows corporations to continue to distort
their true financial standing.
Stock options make up 80 percent of compensation packages for
corporate managers. In 2003, CEO pay at 350 major U.S. public companies
averaged $8 million, with stock options as the largest component.
Despite those facts, stock options are the only form of compensation
that may be completely absent from corporate financial statements. H.R.
3574, a supposed compromise from the FASB rule, only counts stock
options given to the top five executives--when calculated using what
Warren Buffett describes as ``fuzzy math''--in the bottom line, but not
those options given to others.
The special accounting treatment of stock options which this bill
would allow to continue, has fueled abuses linked to excessive
executive pay, inflated earnings, dishonest accounting, and corporate
misconduct. Nobel Prize winner, Joseph Stiglitz, believes that the
absence of stock option expensing requirements has ``played an
important part in the spread of other forms of financial chicanery''
where corporate energy and creativity was ``directed less and less into
new products and services, and more and more into new ways of
maximizing executives' gains at unwary investors' expense.'' A report
by a blue-ribbon panel of the Conference Board found that the current
treatment of stock options has fostered a vicious cycle of increasing
short-term pressures to manipulate earnings to bolster stock price so
that those receiving options could cash-in, take the money, and run.
FASB is currently working to address this problem, yet Congress, with
the passage of this bill, will undercut its effort. FASB's proposed
rule would remove the perverse incentives to manipulate earnings and
help bring transparency to corporate financial statements. FASB is
trying to close an accounting loophole that has allowed corporations to
understate executive compensation and distort the companies' financial
standing. Investors and pension plan managers want the kind of accurate
financial information that FASB's rule would provide: it would help
them make informed investment decisions about retirement security. Let
us let FASB do its job.
Two years ago, when we passed the Sarbanes-Oxley Act, we recognized
the need to protect the Financial Accounting Standards Board, or
FASB's, independence for setting accounting standards. We knew then
that if we wanted true corporate accountability, if we wanted to
protect investors and pension holders, then we needed to make sure that
an independent body was overseeing accounting standards to which
corporations had to adhere, and FASB's independence became an important
part of the Act. We knew that then, but how soon we forget. As
Consumers Union states, ``Those reforms (to hold corporations
accountable) will have proven to be all but meaningless if less than
two years after they were enacted, Congress reneges on its promise and
subjects the independent, standard-setting process to political
interference.'' That is exactly what we will do--render meaningless our
own reforms--if we pass H.R. 3574.
As Alan Greenspan recently said, ``With respect to stock options, I
think it would be a bad mistake for the Congress to impede FASB in this
regard. And in this regard, as best I can judge, the FASB changes in
recommendations with respect to accounting procedures strike me as
correct, and it's not clear to me what the purpose of the Congress is
in this particular procedure.'' It is not clear to me either. What is
clear is that if this bill passes, we are telling investors, pension
holders, and workers that Congress believes it is fine to keep them in
the dark, and that corporations can continue to hide their true
financial standing. I urge my colleagues to vote no on H.R. 3574.
Mr. BAKER. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from
Arizona (Mr. Shadegg), a member of the committee and an interested
party in this most important issue.
Mr. SHADEGG. Mr. Chairman, I thank the gentleman for yielding time
and I rise in strong support of H.R. 3574, the Stock Option Accounting
Reform Act.
Let me make it very clear, this is not a technical issue which
Congress should leave to FASB. This is not how do we account for
something. Indeed, that issue presents itself here, and no
[[Page H6005]]
one can agree on how we should account for the expensing of stock
options.
But the issue that brings us here is not a technical FASB issue; the
issue that brings us here is one that has great implications on public
policy. That is, do we continue to incent companies to use stock
options to give employees a stake in their company, which I believe all
Americans want and is the key to our Nation's vibrant economy, or do we
squelch that by allowing a technical rule to go into place forcing the
expensing of all stock options the minute they are issued.
I submit to my colleagues that it is FASB that is acting too fast. It
is FASB that is acting imprudently and without taking the time to study
this area closely. Indeed, there has been no study yet of the impact on
our economy were we to suddenly jump forward and require the expensing
of all stock options immediately. This economy is beginning to emerge
from a recession and is getting stronger every day, but it is
critically important that we allow America's companies to continue to
give incentives to their employees.
This is particularly true of start-ups. It may be that the big
companies, those with billions of dollars in assets, can handle this
requirement, but the little start-ups, the small companies that bring
ingenuity to the marketplace and challenge the existing large companies
in the market and our high-tech industry, have survived and indeed
prospered by using stock options. They are confident that this will
damage them immensely.
Harvard professor William Sahlman has said, ``If the advocates of
expensing win their small point and the spotlight on corporate America
fades away as a result, I fear that we will end up having done nothing
at all to prevent unscrupulous executives from yet again stealing their
investors' money.''
It is absolutely critical that we not allow FASB to treat this as a
technical issue. There is not yet an agreed-upon best or even good
method for calculating the value of stock options. Expensing will not
make our corporate expenditures more clear or bring greater clarity to
investors. It solves nothing.
I urge my colleagues to oppose it because it will hurt start-ups and
it will hurt high-tech companies.
Mr. KANJORSKI. Mr. Chairman, I yield 3 minutes to the gentleman from
Massachusetts (Mr. Frank), the ranking member of the Committee on
Financial Services.
Mr. FRANK of Massachusetts. Mr. Chairman, I appreciate the leadership
the ranking member of our subcommittee is showing here. I am somewhat
torn on this bill because I do agree, it is certainly beyond question,
that the granting of stock options in the high technology industry,
especially for start-up companies, has been enormously beneficial, and
I do not want to see it changed. I do not even want to take the strong
risk of it being changed, so if I were in charge of the Financial
Accounting Standards Board, I would defer this. But I am not, and I do
not want to be.
We are in danger, I think, on this and on other issues of collapsing
entirely the notion of a kind of respect for procedures. It is a
mistake for this body always to legislate to get the specific outcome
it wants on a particular issue without regard to the institutional
frameworks. I think the institutional framework of a separate and
independent and autonomous Financial Accounting Standards Board is a
valuable asset. I do not want to impinge upon it.
Members of this body are well aware that we never do anything only
once. Maybe you can eat one potato chip, but you cannot overrule a
board once only. If we set the precedent today of dictating to the
Financial Accounting Standards Board what the accounting standards
ought to be, I believe we will live to regret it.
With regard to the options, here is the issue. I think they are a
good thing in companies, particularly young start-ups. They ought to be
able to give them. I guess if you are an old start-up, you ought to get
out of the business. Young start-ups ought to be able to continue to
give them.
Here is the argument, because nothing in what FASB says says you
cannot do them. What we are talking about is this: If companies are
mandated to change the way in which they do the accounting on this, no
change in the reality, but they change the accounting, will this leave
the investment community to abandon a whole class of investments? I do
not think a large number of people are now misled because it is in the
footnote. I would assume if you are going to invest, you read the
footnotes. But neither do I think that people will abandon the whole
class of investments because when the accounting changes and it goes in
the footnote to an expense, some of these companies will have gone from
having shown a profit in one form of accounting to showing a loss.
That is the argument. The argument is because nothing is being
proposed. It would ban stock options from being done.
What we are being told by the high-tech community, and I understand
their fears, they do not want to take this risk. They are arguing that
the investment community is apparently pretty dense and as long as the
options are put into a footnote and they show a profit, they will
invest. But if we change the accounting, the reality has not changed
one iota, they will walk away from the whole class of places.
Where is the gentleman from Texas, the former majority leader, Mr.
Armey? Because he is the one who said, government is stupid and markets
are smart. Would he please explain to them that markets are not stupid?
In this case, he may have been right, because this is the argument.
The crux of the argument is that if you change the accounting and do
not change the reality, you will collapse investor interest in this
whole class of industry, and I think that is wrong.
Mr. BAKER. Mr. Chairman, I yield myself such time as I may consume.
I wish to speak to the issue of FASB's independence and their track
record on matters of financial accounting standards. It was in the fall
of 1998 when FASB issued a statement relative to concerns about
earnings manipulations by registrants in a number of industries,
specifically banks, in the treatment of what was called loan loss
reserves.
{time} 1230
The allegation was that executives were exacerbating the amount of
reserves necessary in order to offset potential volatility in financial
institutions' earnings. Suffice it to say, it is a technical issue,
again beginning in fall of 1998. I reference testimony of Governor
Lawrence Meyer, member of the Federal Reserve, speaking on behalf of
the Federal Reserve and all finance regulators. Six years later a
letter issued then by the FDIC indicated that institutions should
continue to determine the appropriateness of all their loan loss
reserves on the basis of existing guidance set forth in GAAP and in the
agency's supervisory guidance. Translation: they should ignore what
FASB started 6 years earlier as an ill-conceived modification of safety
and soundness provisions.
The point of this historic analysis is to provide the Congress with
the understanding that FASB does not always get it right. I join with
many Members of Congress in that era in expressing concerns about the
unintended consequences of the implementation of FASB's rule should it
be implemented.
Let us talk about what FASB has done in the course of the
consideration of the issue currently at hand. The board announced their
positions before a single comment from the public was solicited. The
board disinvited comments on key issues of the current matter. The
board disregarded the overwhelming majority of comments solicited. The
board created an option valuation group to discuss valuation.
After all was said and done, apparently FASB did not find the board's
work to be of much use since it decided to revert to the same valuation
models before appointing the board. FASB refuses to conduct road tests
of actual valuation models, meaning it is not trying out to see what
the real-world consequence is of its valuation methodology. It has
refused to respond to industry presentations on the existing valuation
methodologies. It has refused to respond to recommended alternatives
and compromises.
What has the board done? I alert the Members who have not yet
received it to an e-mail distributed by a representative of FASB's
foundation, I assume an independent arm of an independent
[[Page H6006]]
agency prescribed with the responsibility of engaging in political
correspondence. What is a sad note about this particular e-mail, if one
goes to the two phone numbers listed at the bottom of the e-mail, which
is probably in all Members' offices, and they call those numbers, they
can then refer themselves to directory assistance and ask for FASB's
telephone numbers.
The two numbers cited in this independent political correspondence
are numbers listed as FASB's official phone numbers. If one were to
apply their own standards of financial transparency to their own e-
mail, it should say FASB is now lobbying the Congress and using our
phone numbers for ones to respond and make significant inquiry into the
matter. It would appear although they find political interference a
sullied and tawdry business, they have now engaged in such practice in
attempting to influence the Congress on the direction of appropriate
conduct.
What is an option, and what does it mean to our economic direction?
Assume for the moment we are trying to gather a half dozen young bright
people into a garage at someone's home to construct a new innovative
product and we bring these people in without sufficient cash to pay
them salary; but we offer them the opportunity, should their
intellectual prowess be sufficient in building value to a company, to
one day cash in on the options we are giving them as a piece of their
investment. Assume for the moment the value of the options are $20.
Things go awry. Things go poorly. Six months hence the stock price may
be worth $10. The employees will not cash in their right to those
options because they are called, in the terms of the industry,
underwater. They are not worth what they were when they were granted.
The employee may leave and go elsewhere. Without the passage of this
bill, what would FASB require them to do? To expense that option at the
time of granting even though it were later not exercised. The result:
an underreporting of financial value of corporate value. That seems to
me to be just as big a problem as what those opponents allege is some
grand misrepresentation of current financial condition.
Options are reported today in the footnotes. One who persists can
find out the dilutive effect on other shareholders. Translation: one
can find out the facts about accurate financial condition if they
choose to seek it out in currently published information.
It is quite clear that many have accused the current administration
and others of finding ourselves in a jobless economic recovery. Were
that to be the case, which I certainly dispute, there is no dispute
that the granting of options to a broad base of employees has been and
remains a very strong component of job creation within our economy.
Does it make sense for those who criticize a jobless economic recovery
to take away one of the proven tools that does create jobs when they
are so badly needed? I think not.
So where are we to go? The identified problem was that a handful of
executives were manipulating the granting of options for their personal
financial gain. I, frankly, do not think the bill before us is a
perfect remedy. I think it is a flawed remedy because the valuation of
the option cannot be accurately predicted. But in response to the
critics, we have said those top five must expense their options. Let us
make them accountable for the reported wrongdoings of the past, but
please do not affect adversely the broad-based stock option plans for
the vast numbers of employees who have gained from their hard work,
shared in the dynamic capital enhancement of corporations, and, yes,
made money.
I am one of those staunch advocates in the Congress who believe that
money is the cure to poverty. And by allowing employees to invest and
work and believe in the great American Dream that one day they can have
a part of it, stock options represent a magnificent tool of economic
opportunity.
I urge this Congress to adopt H.R. 3574 as balanced; fair;
transparent; and, most importantly, important for our economy.
Mr. Chairman, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, I yield 3\1/2\ minutes to the gentleman
from Florida (Mr. Stearns).
(Mr. STEARNS asked and was given permission to revise and extend his
remarks.)
Mr. STEARNS. Mr. Chairman, I rise in opposition to the bill.
And let me talk to my good friend from Louisiana. I heard him say in
his statement that this bill is a flawed remedy. That is what I heard
him say. And I agree with him. The bill is flawed.
He mentions the footnotes. During the oversight hearings on Enron, we
had the dean of the Dartmouth School of Business spend 3 weeks looking
at the footnotes of Enron. He could not, he could not understand them,
and he said nobody in their right mind could understand the footnotes.
We could go from Enron across any of these corporations and see the
lack of clarity in their corporate footnotes. WorldCom is another one,
where Bernie Ebbers paid himself tens of millions of dollars in stock
options, and they were never accounted for. People are not going to
find them in the footnotes.
This legislation is attacking accounting standards, and he is
criticizing FASB. Certainly one could criticize the Securities and
Exchange Commission. Where were they during all this corporate
corruption?
Options are immensely valuable to those who receive them, and we all
agree options are good. That is not the debate. The debate is what this
bill is about. Options are fully deductible against corporate income
tax. A congressional mandate to ignore economic reality does not change
economic reality.
If my colleagues are thinking of voting for this legislation, they
should ask themselves why Congress should forbid that stock options be
deducted from corporate income when reporting to investors but fully
deductible against income when paying corporate taxes. It is a
distinction that makes no sense.
Listening to the debate today, we know that this legislation is
opposed by Allen Greenspan; Treasury Secretary John Snow; SEC Chairman
Bill Donaldson, the chairman of the SEC. Warren Buffet has ridiculed
this legislation, saying it is absolutely flawed, it makes no sense.
I know of no occasion in history in which the United States Congress
by statute has written an accounting rule, and that is what we are
doing today. Are Members so confident in this body in their knowledge
of accounting and financial markets that they will disregard the
unanimous advice of the President's leading economic indicators,
advisers, and the most famous investor in history? He has had 62 years
of investing. How many of us have done that? He has ridiculed and said
this bill is flawed.
Obviously, we should make some change to FASB. I agree with that, and
I believe we are missing an opportunity today because there is another
way to approach the problem of accounting for options that would be
less heavy handed and might improve the quality of information
investors receive so when they go to the footnotes, they will be there
and they can actually understand what the stock options are all about.
U.S. GAAP is very detail oriented. It needs to be changed. On that I
agree with my colleague from Louisiana. We learned from our
investigation of Enron and WorldCom that the very complexity of GAAP
itself can be exploited by those who obscure rather than enlighten. The
legislation we are considering today mandates a dictatorial rule
grafted on to the current GAAP regime that needs change, that simply
forbids expensing except for the top five executives. Why is that so
sacrosanct that we take just the top five? What about six? What about
seven? What about eight? What about four? What about three? No. Just
the top five. And then so long as those executives can significantly
undervalue their options. If my colleagues stand for a rigorous
accounting, oppose this bill.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentlewoman
from New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Chairman, I thank the gentleman for his leadership
and for yielding me this time.
I rise in opposition to this bill and in support of the amendments by
the gentleman from California (Mr. Sherman) and the gentleman from
Pennsylvania
[[Page H6007]]
(Mr. Kanjorski) and me. And in opposition to this bill, I am joined
with comments from Arthur Levitt, John Bogle, Warren Buffet, Allen
Greenspan, John Snow, SEC Chairman Donaldson, and many others. Their
comments I will include for the Record.
Some of my colleagues today have said that it is necessary for
companies to not show the cost of stock options to investors in order
to encourage innovation. So my question is why is it necessary for
companies to hide an expense to innovate? Why in the world is this good
public policy? On the contrary, this accounting loophole encourages
companies like Enron and WorldCom to artificially inflate the value of
their stock, deceive investors, and evade corporate income taxes. Many
large companies have employee stock options and expense them, including
Home Depot, Microsoft, Netflix. We should continue and have one
standard.
In understanding stock options and their use, there is probably no
greater authority than the indicted Enron president and CEO, Jeffrey
Skilling. This is what Jeffrey Skilling has to say about stock options
when he testified before the Senate: ``Because stock options are not
required to be disclosed as an expense on public filings, corporations
use them to hide expenses and inflate the balance sheet. You issue
stock options to reduce compensation expense and therefore increase
your profitability.'' He ought to know, and he is going to jail.
Hidden stock options encourage accounting fraud. End of story. I urge
a ``no'' vote on the underlying bill.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the gentleman from
California (Mr. Cox), a respected Member on matters of financial
reporting.
Mr. COX. Mr. Chairman, I thank the gentleman from Louisiana (Mr.
Baker) for bringing this bill to the floor.
It is vitally important because I agree with the last speaker, hidden
stock options are a tool of fraud artists. What we are about to do at
FASB is give corporate managers, the new Jeff Skillings, an opportunity
to manipulate earnings because, by choosing whether or not to issue
stock options, they will now be able to do what they cannot do today,
and that is fudge the earnings figure. Currently, stock options are not
run through the income statement. But if we make this change where we
imagine a notional value for stock options, where nobody real knows
really what they are worth, run them not through the balance sheet but
through the income statement, we have now got a new tool to manage
earnings. That is exactly what Enron taught us we should not do.
We should fully disclose stock options, and there is ample evidence
that we can do much better in disclosing to investors stock option
costs to the company, to the shareholders, and the place we do that is
on the balance sheet.
{time} 1245
The issuance of stock and the issuance of an option on stock is a
dilution event. It is an adjustment to the capital accounts. It belongs
on the balance sheet; it does not belong on the income statement.
The FASB chairman testified before the Committee on Energy and
Commerce 2 weeks ago that FASB wants to make this change not because it
is technically correct or professionally sound, but rather ``because of
the high level of public concern expressed by investors.''
But during the most recent proxy season, shareholders across the
country are rejecting proposals to expense stock options. Shareholders
of Gillette where Warren Buffett, the champion of stock option
expensing on the income statement, sits on the board and controls
nearly 10 percent of the shares, voted against expensing on the income
statement.
The people for whom FASB claims to be acting, the people with money
at stake, are not only not convinced, but they recognize if FASB goes
forward with this, it is going to be a new tool for manipulation.
Let us keep the earnings statement honest. Let us vote for the bill.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentleman from
Georgia (Mr. Marshall).
Mr. MARSHALL. Mr. Chairman, I spent a lot of my career as a lawyer
representing small banks and small businesses and individuals that felt
that they had been defrauded as a result of false financial statements
that had been provided them in order to induce investment or induce
credit.
Most folks who are watching this understand that they cannot file a
false financial statement in order to get a credit card, that they
cannot file a false financial statement in order to get a loan. They
have got to comply to the letter with the information that is requested
and provide that information, failing which they could end up in jail.
That, I think, is largely what is going on here.
The question is whether or not we are going to defer to the Financial
Accounting Standards Board, which historically has set the standard for
providing the financial statements of a corporation, whether we are
going to defer to that body so that that body can figure out what kind
of information must be provided so that the financial statements of a
corporation fairly reflect the condition of the corporation, or are we
going to interfere and essentially enable start-up venture capital
corporations to mislead those who are investing in those businesses.
Now, most investors are sophisticated enough they are going to read
the footnotes and understand that there are stock options that have
been granted, and that consequently the value of the corporation and
its earnings have been affected as a result of that. But some are not.
We should leave it to the experts, independent experts that do not
have a dog in this fight as far as money is concerned, to try to come
up with the standards that are appropriate in order to assure that the
best kind of financial reporting is available to those who are
investors, to those who are shareholders.
It is no different really than seeking a credit card, wanting to get
money from an investment company, wanting to get money from a bank,
wanting to get money from somebody else, and having to fill out a
financial statement. It is as simple as that. We ought not to be
interfering.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio
(Mr. Boehner), a staunch defender of free enterprise.
Mr. BOEHNER. Mr. Chairman, I rise before my colleagues today to urge
support for the bill offered by the gentleman from Louisiana (Mr.
Baker).
In many respects, the use of broad-based stock options reflects what
we have come to understand about our new economy, that is, that
economic growth and opportunity are all about unleashing the talents,
ideas and knowledge of workers who create constant improvements and
constant innovation. The employers who have best answered this call and
who have best generated the kinds of jobs that our workers need are
those who have understood that these products and services come from
bright, enterprising workers who will share their imagination and
experience with their employers. That is why stock options have become
such a fixture of economic growth, and it is important that we preserve
the ability of employers to give their employees a stake in the success
of their organization.
Regrettably, instead of recognizing stock option plans for what they
are, incentive plans, FASB has deemed them a net cost to the company
and supports requiring these firms to calculate and deduct those costs
from corporate earnings. If companies do, the real losers in this will
be American workers and the U.S. economy.
Who knows at what value companies will be required to charge their
earnings? I think the point that was made by the gentleman from
Louisiana (Mr. Baker) and the gentleman from California (Mr. Cox) that
the ability of corporate managers to manipulate earnings based on the
value of their stock options is in fact a real concern.
So, while we can get hung up on whether we should interfere with FASB
or not, we are elected by the American people to represent their
interests; and I believe when you look at the use of broad-based stock
options in the American economy, it really is the incentive that is
driving many companies and their employees to be creative, to be
inventive and to continue to be the real leaders in the world economy.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the gentleman from
Virginia (Mr. Goodlatte).
[[Page H6008]]
(Mr. GOODLATTE asked and was given permission to revise and extend
his remarks.)
Mr. GOODLATTE. Mr. Chairman, I thank the gentleman from Louisiana
(Chairman Baker) for his leadership on this issue, and I rise in strong
support of H.R. 3574, the Stock Option Accounting Reform Act.
For years, companies in the U.S. have been using stock options to
attract the most skilled applicants in the world. Because many new
companies do not have the financial resources to attract the best
qualified candidates, stock options provide a much-needed incentive for
the brightest workers to work for them.
Not only do stock options hold the potential of additional income for
employees, but they create a sense of ownership that helps workers
recognize they have a stake in the company.
Now is not the time to bind the hands of America's technology
companies by imposing additional layers of red tape on them. If U.S.
companies are to continue to win the global competition for tech
talent, they need to have the most flexibility to run their companies,
including the flexibility to offer innovative compensation and benefits
packages like stock options.
H.R. 3574, the Stock Option Accounting Reform Act, would allow
companies to continue their practices of offering stock options to
employees as a method of attracting the best and brightest workers
without mandating that companies expense these stock options in annual
reports.
There are also important safeguards in the Stock Option Accounting
Reform Act to guard against corporate fraud. While companies would not
have to expense the stock options given to rank-and-file employees,
they would have to expense any stock option given to the chief
executive officer and the next four most highly compensated executive
officers of the company. In addition, this legislation requires
companies to clearly disclose all information related to stock options
in plain English in their financial statements.
H.R. 3574 protects an important tool that small businesses and start-
up companies use to compete with others all over the world to bring the
most skilled employees to work in the U.S. With companies in China and
other competitors using stock option compensation packages to attract
workers, we must ensure our government does not impede the ability of
U.S. companies to compete in the highly-skilled labor market.
H.R. 3574 contains important safeguards against corporate fraud and
ensures that American businesses have the tools they need to compete in
the global marketplace.
Mr. Chairman, I urge each of my colleagues to support this important
legislation.
Mr. BAKER. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from
Minnesota (Mr. Kennedy), a member of the committee.
Mr. KENNEDY of Minnesota. Mr. Chairman, I too rise in support of the
Stock Option Accounting Reform Act. This is about innovation that
drives our economy. So many businesses have stock options as a primary
tool to get the innovative juices of their employees going. It also
really helps align the employees of the company with the interests of
the company, moving it forward, helping it to be competitive.
This is a prime source of our innovation and success here in America.
We do not need to limit it beyond the top five officers, as this does.
If we went ahead with expensing stock options, the volatility and
uncertainty, I think, would end the use of stock options and be
detrimental to our economy.
So I do believe that we have to move forward to protect this
innovative source of energy in our economy, keep our small businesses
creating the new jobs of the future, keep America at the cutting edge,
keep employees motivated and aligned with the interests of their
enterprises, and this, in the end, will be good for America and good
the American economy.
Mr. KANJORSKI. Mr. Chairman, I reserve the balance of my time.
Mr. BAKER. Mr. Chairman, I yield 1 minute to the gentleman from Texas
(Mr. Hinojosa).
Mr. HINOJOSA. Mr. Chairman, I rise as a cosponsor and a strong
supporter of H.R. 3574, the Stock Option Accounting Reform Act.
Stock options are extremely important to America's economic growth.
They allow companies, particularly start-ups, to recruit and retain
top-flight talent when the salaries they offer cannot compare with more
established competitors. This is particularly important since the
majority of the new jobs in the economy come from start-ups, and that
issuance of stock options did not lead to corporate corruption.
The mandatory expensing of stock options as proposed by the Financial
Accounting Standards Board will result in stock options being offered
to only the most senior managers, if at all. Requiring the expenses of
all stock options will make companies less inclined to offer such
options to employees and thereby hamper the ability of companies that
currently offer options to attract and retain talented employees.
Because options are used extensively by small innovative start-up
companies, requiring expensing would have an adverse impact on
innovation, economic growth and competitiveness.
It will confuse investors, because they cannot be accurately valued
and do not reflect a cash cost. The expensing of stock options reflects
a desire to reduce all potential liabilities to a single number in a
company's earnings statement. However, GAAP earnings are only one
measure to which investors should be looking.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the gentleman from New
Jersey (Mr. Menendez), the chairman of the Democratic Caucus.
Mr. MENENDEZ. I thank the gentleman for yielding me time.
Mr. Chairman, I rise today in strong support of H.R. 3574, the Stock
Option Accounting Reform Act. This bill I believe is proworker and
corporate accountability. It is a true compromise that will protect
broad-based stock options for rank-and-file workers, while ensuring
accountability and transparency of the top corporate executives.
This bill requires stock option expensing of the top five corporate
executives, which ensures public disclosure of executive compensation
packages. So there is full disclosure and full transparency for
corporate executives. At the same time, the bill protects the stock
options that rank-and-file workers currently receive.
More than 14 million U.S. workers receive stock options and 15
percent of union workers receive stock options. That means that rank-
and-file workers, not just corporate executives, are sharing in the
benefit of stock options. These options are crucial to the global
competitiveness of high-growth industries in this country. Companies
such as the high-tech industry have to rely on stock options to recruit
and retain high-skilled workers, very often keeping these good-paying
jobs in the United States, rather than sending them overseas.
Stock options also give employees a stake in their company, creating
incentives for every employee to work hard and ensure that the company
succeeds. That gives U.S. companies an additional competitive advantage
over their foreign competitors.
Some have argued that this bill just benefits fat-cat executives, but
I believe nothing could be further from the truth. No one should be
fooled into thinking that this bill lets corporate executives off the
hook, because it does not. It actually requires the expensing and full
accounting of the top executives' stock options.
It is naive to think if we require the expensing of all stock
options, that suddenly executive compensation packages are going to be
reduced or eliminated. That simply is not going to happen. What will
happen if this bill is not passed, however, is that the stock options
of 14 million rank-and-file workers will be in jeopardy. I encourage my
colleagues to support the bill.
Mr. BAKER. Mr. Chairman, I yield 1 minute to the gentleman from
Oregon (Mr. Blumenauer).
Mr. BLUMENAUER. Mr. Chairman, I appreciate the gentleman's courtesy
in permitting me to comment briefly.
I want to make three points: One, WorldCom and Enron, some of the
abusers that we have talked about here, did not have broad-based stock
option programs. If you have listened carefully to the debate, no one
has given an example of abuse from any broad-based company scheme.
Indeed, the fact that they are broad-based makes it less likely that
they will be abused.
[[Page H6009]]
{time} 1300
Second, cash poor, innovative companies deserve this tool. This is
how they can compete with the more mature companies that the Warren
Buffetts of this world invest in, where cash is king.
Third, contrary to what some of my friends have asserted, if one
talks to investors, employees in these companies, and executives, they
all agree that the highly variable balance sheet values that will be
produced by this scheme will have a very negative impact on the
perceptions of these companies, making it much less likely that they
will use this technique.
The consensus is clear, and I hope my colleagues will approve the
legislation.
Mr. BAKER. Mr. Chairman, I yield to the gentleman from Michigan (Mr.
Smith) for the purpose of making a unanimous consent request.
(Mr. SMITH of Michigan asked and was given permission to revise and
extend his remarks.)
Mr. SMITH of Michigan. Mr. Chairman, I rise to oppose the bill and
ask that my ``no'' vote be submitted in the Record at this point
because of the uniqueness of the intrusion of the Federal Government in
demanding accounting principles.
I oppose H.R. 3574 for two reasons. First, it would set a precedent
of Congress interfering in accounting minutia. According to CRS,
Congress has never passed a law telling the private sector how to do
accounting other than taxes. Second, if this bill were to become law,
it would require different accounting standards for the United States
and the rest of the world. It would, in effect, require two different
accounting numbers for international companies, one with U.S. standards
and one with international standards, as set by the International
Accounting Standards Board (IASB). FASB, Federal Reserve Chairman
Greenspan, SEC Chairman Donaldson, and many others have said that this
type of rule change may harm the transparency of American accounting
rules.
Mr. Chairman, I add to my ``no'' vote explanation, comments by some
financial experts:
The Honorable Alan Greenspan, Chairman, Federal Reserve
System, April 21, 2004
With respect to stock options, I think it would be a bad
mistake for the Congress to impede FASB in this regard. And
in this regard, as best I can judge the FASB changes in
recommendations with respect to accounting procedures strike
me as correct, and it's not clear to me what the purpose of
Congress is in this particular procedure. I think the
Congress would err in going forward and endeavoring to impede
FASB in its particular activities:
William H. Donaldson, Chairman, United States Securities
and Exchange Commission, May 3, 2004
For the policy reasons described above, recently
underscored by the Sarbanes-Oxley Act, I strongly support an
independent and open standard-setting process for
establishing accounting principles for U.S. public companies.
Accordingly, I believe that the process established by the
FASB to consider the pending stock option proposal should be
allowed to run its course:
The Honorable Paul A. Volcker, Chairman of the Trustees of
the International Accounting Standards Committee Foundation,
and former Chairman of the Federal Reserve System, April 20,
2004
I suggest that, before acting, Senators and Congressmen ask
themselves two simple questions: Do I really want to
substitute my judgment on an important but highly technical
accounting principle for the collective judgment of a body
carefully constructed to assure professional integrity,
relevant experience, and independence from parochial and
political pressures? Have I taken into account the adverse
impact of overruling FASB on the carefully constructed effort
to meet the need, in a world of globalized finance, for a
common set of international standards?
Warren Buffett, Chairman and CEO, Berkshire Hathaway, May
1, 2004
Write your congresspeople giving them your views on whether
options should be expensed. . . . It was a disgrace 10 years
ago when Congress bludgeoned the SEC and the [Financial]
Accounting Standards Board to override FASB's decision to
expense options. It accelerated the anything-goes mentality
of the 1990s.
The Honorable Richard C. Shelby, Chairman of the Committee
on Banking, Housing, and Urban Affairs, United States Senate,
June 30, 2003
I don't think we should make those rules in the Banking
Committee or even in Congress. . . . [FASB] understands the
implications. There are economic implications here, but it
also gets into corporate governance and honesty in financial
statements.
In conclusion Mr. Chairman, options clearly have a value and failing
to expense them, despite the difficulty of doing so, distorts financial
statements and is misleading and unfair to the casual investor.
Mr. BAKER. Mr. Chairman, I yield reluctantly only 1 minute, because
of time limitations, to the gentleman from Texas (Mr. Barton), the
chairman of the Committee on Commerce.
Mr. BARTON of Texas. Mr. Chairman, I thank the distinguished
subcommittee chairman, the gentleman from Louisiana (Mr. Baker); and I
want to commend the full committee chairman, the gentleman from Ohio
(Mr. Oxley), for bringing this bill to the floor.
There have been some issues about how to get it to the floor, and I
am happy to report that we were able to work those out. The committee I
chair was given a sequential referral, which we handled very
expeditiously on Friday while we were not in session, so we were able
to move on this bill.
I think the policies in the bill are a fair compromise between those
who think all stock options should be expensed and those who think no
stock options should be expensed. The gentleman from Ohio (Mr. Oxley)
and the gentleman from Louisiana (Mr. Baker) and others on the
Committee on Financial Services have given us a compromise that sets a
finite number of the most senior management team whose options should
be expensed.
So I am happy to support the bill. I would encourage all Members to
vote for the bill and hope that we can move it to the other body and
hopefully get a positive vote on this piece of legislation in the other
body.
So on behalf of the Committee on Energy and Commerce, we are happy to
cooperate with our friends on the Committee on Financial Services to
bring this bill to the floor.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentleman from
California (Mr. Sherman).
(Mr. SHERMAN asked and was given permission to revise and extend his
remarks.)
Mr. SHERMAN. Mr. Chairman, I come here as a CPA to fight for the
independence of the FASB, an independent board that has given us
generally accepted accounting principles which this bill would change
to generally political accounting principles. America has to fight in
the world for capital.
In China, domestic companies just report pretty much whatever they
want on their financial statements. America competes with tough,
transparent, enforced, nonpolitical accounting standards. That image
has been recently tarnished by recent scandals, and now we are being
told to adopt generally political accounting principles that will
further tarnish our image.
We are told that it is difficult to estimate the expense amount of
stock options, that accountants cannot do it. Well, it is actually a
lot easier than things accountants have been doing for centuries
involving amortization, obsolescence, depreciation, and dozens of other
estimates. We are talking here about executive compensation, some $40
billion a year.
Now, imagine if you gave a crumb to 999 people and a giant cake to
one person. You could then come to the floor and talk about a broad-
based distribution of carbohydrates. That is in effect what we have
here.
When the academics came before our committee, they explained roughly
30 percent of all stock options are in the hands of the top five
executives, and the remaining 70 percent is spread very narrowly among
other top executives. We have crumbs for the rank-and-file, almost all
the options in the hands of the top executives. That is why 80 percent
of CEO compensation in this country is in the form of stock options.
Let us say, even though that phoney accounting was good, should we
not do it for health care instead of executive compensation? Why not
have an accounting principle that says companies can provide employee
health care, and we are going to encourage them to do so, and they do
not have to list it as an expense on their income statement? The users
of accounting information do not want this bill. The Investment Company
Institute representing the mutual funds, and Alan Greenspan, for
example, have come out against it.
Finally, this bill is absurd politics. It will hurt America in the
fight for capital around the world.
This bill, for the first time in history, would overrule the FASB.
Let us vote it down.
Mr. BAKER. Mr. Chairman, I yield 1 minute to the gentleman from Texas
(Mr. Hensarling), a member of the
[[Page H6010]]
committee and an outspoken advocate for the bill.
Mr. HENSARLING. Mr. Chairman, I thank the gentleman for yielding me
this time, and I thank the gentleman from Louisiana (Chairman Baker)
and the gentleman from Ohio (Chairman Oxley) for their work on this
compromise legislation that is so important to our economy.
H.R. 3574 would prevent the proposed FASB rule from hurting start-ups
and other small companies who very often rely on stock options as an
incentive to hire and retain employees. If FASB is permitted to require
these companies to report their options as an expense, the result will
be a distorted view of earnings by investors and less confidence in our
markets.
This bill will help improve the transparency and disclosure of stock
options, while not negatively impacting the ability of businesses to
provide this valuable incentive to their employees.
As our economy continues to improve and investor confidence rises, we
must be careful not to place any excessive burdens on private business
or act in any way that would reduce confidence in our markets.
If expensing options is mandated, I believe inaccurate and certainly
misleading information will be produced, leaving investors with more
questions than answers about a company's financial statements and
economic conditions.
Also, Mr. Chairman, studies have shown that companies with broad-
based option plans are generally more productive, and I urge my
colleagues to support this legislation.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentleman from
Illinois (Mr. Emanuel).
Mr. EMANUEL. Mr. Chairman, I rise in strong support of the bipartisan
Kanjorski-Castle substitute and oppose the underlying bill.
I find it ironic, on a day in which the Wall Street Journal reports
in its lead story about the disparity in the economy between the top 1
percent who are benefiting from this economy and the middle class who
are hitting a dry hole as it relates to income costs, college costs,
savings and retirement, here we are on the floor debating a bill in
which the bulk of the benefits go to the top 1 percent.
Eighty percent of the compensation for CEOs is in the form of stock
options. This is the year in which we are supposed to debate a higher
education reauthorization bill. We do not do it. This is the year in
which 44 million Americans are without health insurance, 33 million who
work full-time. We do not debate it. So what does this Congress do?
Rather than do the things it is supposed to be involved in, it is
involving itself in the things that we should not be involved in. I
wonder why the American people are so cynical about what we do around
here.
The fact is, let me give Warren Buffett's quote about expensing stock
options, with all due respect to the intelligence and the wisdom of 435
Members when it comes to the private sector. Warren Buffett says, if
options are not a form of compensation, what are they? And if
compensation is not an expense, what is it? And if expenses should not
go into the calculation of earnings, where in the world should they go?
That was Warren Buffett's analysis. That is why he believes this is
the right thing for FASB to do.
The fact is, FASB was right to say that there should be expensing of
options. What they need to continue to work on is how we come up with
the issue of value and how we evaluate them. The work of FASB on this
issue is not done, but they are right when it comes to the issue of
expensing. It is time for Congress to return to the work of focusing on
the middle-class families who are facing squeezes as it relates to
their income that has been stagnated, college costs that have gone up
by 26 percent, health care costs that have risen by 33 percent, 44
million Americans who are without health care, rather than get
sidetracked into issues that do not relate to middle-class families and
the forces of this economy on their living standards.
I support and ask Members to support the Kanjorski bill and not the
underlying legislation.
Mr. BAKER. Mr. Chairman, I yield myself the remaining time.
Mr. Chairman, under the current FASB proposal, one would either use
the binomial or the Black-Scholes methodology to determine the
valuation of a stock option. During the intervening period, staff has
calculated the remaining debate time available to me to close through
both Black-Scholes and binomial, and the result has come out anywhere
from zero to an hour and a half. Recognizing we have a commonsense
limit of 1 minute, I shall proceed diligently.
The current proposal under H.R. 3574 would lead us to a transparent
disclosure regime. It would continue a very important job-creation tool
to our free enterprise system. It would allow employees to share in the
free-enterprise dream of participating in the growth and ultimate
financial profitability in the corporation for which they work.
Make no mistake: this bill nails those executives who have been held
up as the abusive forces within our system by requiring the top five to
expense their options granted.
The solution is not perfect; frankly, I would not require expensing
at all. But it is a response to the critics who said executives have
abused their privilege. For commonsense job creation and reform, I urge
this body to support H.R. 3574.
Mr. UDALL of Colorado. Mr. Chairman, I rise in reluctant support of
this bill.
I support what the bill attempts to preserve. Stock options have been
an important way for companies to attract and retain talented workers.
Many small, start-up companies--competing for employees with larger
firms that can pay more--have been able to offset the advantage of
these larger firms by offering stock options to their employees.
I am not opposed to companies electing to expense stock options
voluntarily--in fact, I voted for Representative Oxley's amendment
today that clarifies the right of those companies to continue to do so.
But with so many millions of our workers still depending on these
options at a time when we need entrepreneurship and innovation more
than ever, I believe that if we are going to require the expensing of
options, we have to make sure it is done right.
I am not an accountant, so I don't claim to know what is the
``right'' way to value options. The Financial Accounting Standards
Board (FASB)--not Congress--is the appropriate institution to be
addressing that question.
I do know, however, that I have heard from constituents, business
leaders, and small and large companies alike representing many industry
sectors that they are concerned about how FASB's current proposal would
value options. One business leader wrote to me that ``the FASB rule in
its current form is unworkable, complex, extremely hard for investors
to understand--let alone management to certify--and costly to
implement.''
I also know that I have heard many concerns expressed about FASB's
process in formulating the stock options expensing rule, and many calls
for Congress to intervene to prevent FASB's current proposal from
taking effect. Many expressing those concerns think that FASB strayed
from its own mission to be objective in its decisionmaking.
Mr. Chairman, this has left me and some of my colleagues in a
quandary. While requiring the expensing of stock options might be the
right course, it is the wrong course if it is done the wrong way. And
with FASB moving ahead on its rule, I believe it is important to
support this bill to send the message that FASB needs to slow down and
work to come up with a standard that has broader support.
So let me be clear that my support for this bill is based less on the
bill's provisions than it is on what I believe are the inadequacies of
the FASB proposal. A better bill would provide investors with the
information they need, but without penalizing the entrepreneurial
spirit and employee ownership that stock options make possible. The
bill we are considering today does not include these improvements.
Mr. Chairman, I strongly support making financial statements more
accurate and transparent. But I also strongly believe that companies in
Colorado and throughout this country have been able to innovate and
contribute to the growth of our economy in part because of the stock
option plans they have been able to offer to their employees. We must
find the right way to value these options so as not to put this
country's workers, their employees, and the economy in jeopardy.
Mr. SMITH of Texas. Mr. Chairman, I support H.R. 3574, the Stock
Option Accounting Reform Act, which preserves broad-based stock
options. It is vital that we preserve these incentives to promote stock
ownership for millions of workers as we try to fulfill President Bush's
goal of creating an ``ownership society.''
In my home state of Texas, numerous high-tech companies offer stock
options to attract the best and the brightest employees. Options
[[Page H6011]]
have become a vital tool used to attract educated and highly-skilled
employees to companies both in Texas and elsewhere.
Broad-based employee stock option plans give employees at all levels
a chance to own a ``piece of the rock.'' This in turn fuels innovation
and the entrepreneurial spirit and increases productivity, because
employees feel as though they have a vested interest in the success of
the company.
However, the Financial Accounting Standards Board wants to change the
rules in a way that would make it more difficult for companies to
continue offering stock options to their rank-and-file employees.
Passage of H.R. 3574 is essential in our efforts to create more jobs
and growth in the high tech sector of our economy. It would be a huge
mistake to discourage companies from offering stock options. Many of
our international competitors are increasing the use of stock options
to gain competitive advantage. So they are a vital tool to recruit and
retain high tech workers in America.
Mr. KIND. Mr. Chairman, I rise today in strong support of H.R. 3574,
the Stock Option Accounting Reform Act. I believe it is extremely
important to the nearly 15 million Americans who hold stock options
that we pass this legislation.
As a member of the New Democrat Coalition, I have always supported
protecting stock options. The promotion of stock options is an
important tool for businesses seeking to recruit and keep employees.
Innovative, creative companies have recognized that a key component to
keeping the brightest and most talented workers is giving employees a
stake in their company. The increasing accumulation of stock options by
American workers has proved a financial success for employees and an
important tool in helping the economy.
Another mark of the success of stock options is that employees at all
ranks of companies hold them. Contrary to popular belief, it is not
only corporate executives who hold stock options; rather, 85 percent of
stock options are held by non-management workers. H.R. 3574 simply
assures that these rank-and-file workers will have continued access to
an important benefit. At a time when Americans are increasingly worried
about losing jobs overseas and many small businesses are struggling,
the protection of stock options is crucial to helping this country's
economy.
Employee stock options are threatened, however, by a Financial
Accounting Standards Board (FASB) proposed standard that would require
companies to expense all employee stock options. This decision was made
over the objection of numerous businesses and despite the likely
negative economic consequences of the proposed standard. If Congress
does not react, we run the risk of allowing millions of hard-working
Americans to lose the financial benefit they have enjoyed from stock
options as well as hurting small and large businesses throughout the
country.
Cleary, there is a great need for the Stock Option Accounting Reform
Act, which would require that stock options given to the top five
executives of a company be expensed and require a study to review the
possible implications of the FASB proposal on workers, businesses, and
the American economy. The FASB ruling has the potential to do great
harm to our country's economy and its workers. To prevent such harm, I
urge my colleagues to support this bipartisan bill that is so important
to American workers.
Mr. HONDA. Mr. Chairman, as a Member of the Silicon Valley
Congressional Delegation, I fully support H.R. 3574, the Stock Option
Accounting Reform Act.
This sensible and balanced legislation promotes corporate
transparency while protecting broad-based employee stock option plans.
Such plans are good for workers, good for business and good for our
Nation!
I would caution my colleagues against believing that stock options
are bestowed upon a privileged few. A 2002 study concluded that 13
percent of American workers held stock options. That equals 14.6
million Americans, 85 percent of whom are in non-management positions.
It is no wonder then that workers are some of the most vocal
opponents to expensing of stock options.
Just consider the comments submitted to FASB by one San Jose
employee, ``I have never felt the same ownership as I do now because of
stock options. I am not an executive in the company but a supervisor-
level engineer. This sense of ownership is true even for the entry-
level technicians who also receive options.''
Another high tech employee rightly concludes, ``Making stock options
less available only hurts the little guys--your constituents.''
I ask my colleagues to act in the best interests of their
constituents. Rather than allow FASB's rules to take effect, Congress
should encourage more companies to offer stock options, so that
thousands more can enjoy the financial security realized by 13 percent
of American workers that have taken advantage of stock option purchase
plans.
Employee stock option plans set our country apart from others; they
reward hard work, ingenuity and dedication--the very qualities that
have helped make our Nation the success story that it is. This bill is
critical to preserving this important tradition.
I urge my colleagues to support H.R. 3574.
Mr. DINGELL. Mr. Chairman, the House should be ashamed today.
Two years after Jeff Skilling of Enron testified before the Congress
about how stock option accounting can be abused to overstate earnings,
and two years after we passed the Sarbanes-Oxley Act to clean up
corporate and accounting fraud, the House has come to this Floor to
pass legislation sanctifying phony accounting. We told the Financial
Accounting Standards board (FASB) to fix this problem--now we're
telling them, and investors, that the political fix is in.
H.R. 3574 is a bad bill. Federal Reserve Board Chairman Alan
Greenspan warned in Congress that ``it would be a bad mistake for the
Congress to impede FASB'' because the proposed FASB changes to
accounting for stock options ``strike me as correct.''
Famed investor Warren Buffett says the legislation is
``nonsensical'' based on ``fuzzy math'' and ``Alice-in-Wonderland
assumptions.''
Why does he say that? Well the bill mandates that, when a company is
calculating the expense of the options given to the five highest paid
executives--the only ones allowed to be expensed--it must assume that
the stock price has zero volatility, i.e., it never goes up or down. As
Buffett notes, the only reason for making such an assumption is to
``significantly understate'' the value of the few options the bill
allows to be accounted ``to enable chief executives to lie about what
they are truly being paid and to overstate the earnings of the
companies they run.''
The Chairman of the Securities and Exchange Commission (SEC) also
opposes this legislation: it runs counter to the SEC's mandate to
protect investors and to make sure that companies provide honest and
transparent information.
The bill gets worse. Not content to sprinkle holy water on bad
numbers, it goes on to prohibit the voluntary expensing of stock
options by companies that want to present honest accounts. There are
currently over 575 companies, including Ford, General Motors,
Microsoft, and Citigroup, voluntarily expensing their options at fair
value. If this bill were enacted in the form reported by the Committee
on Financial Services, they would have to cease doing so and restate
their financials at substantial cost and disruption to the market. Only
after a hearing on the subject before the Committee on Energy and
Commerce did the manager of the bill produce a Floor amendment to fix
this flaw.
Finally, H.R. 3574 is opposed by FACTS (the Financial Accounting
Coalition for Truthful Statements), a broad coalition of 30 pension
funds, consumer groups, labor unions, and investors. Their July 19,
2004, statement to the House warns that ``the proposed legislation is
worse than current accounting practice.''
I urge my colleagues to vote ``yes'' on the Kanjorski substitute,
which affirms the independence of FASB and the importance of honest and
credible accounting standards. If it fails, vote ``no'' on H.R. 3574.
The CHAIRMAN pro tempore (Mr. LaHood). All time for general debate
has expired.
Pursuant to the rule, the committee amendment in the nature of a
substitute printed in the bill shall be considered read.
The text of the committee amendment in the nature of a substitute is
as follows:
H.R. 3574
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Stock Option Accounting
Reform Act''.
SEC. 2. MANDATORY EXPENSING OF STOCK OPTIONS HELD BY HIGHLY
COMPENSATED OFFICERS.
Section 13 of the Securities Exchange Act of 1934 (15
U.S.C. 78m) is amended by adding at the end the following:
``(m) Mandatory Expensing of Stock Options.--
``(1) Named executive officer.--As used in this subsection,
the term `named executive officer' means--
``(A) all individuals serving as the chief executive
officer of an issuer, or acting in a similar capacity, during
the most recent fiscal year, regardless of compensation
level; and
``(B) the 4 most highly compensated executive officers,
other than an individual identified under subparagraph (A),
that were serving as executive officers of an issuer at the
end of the most recent fiscal year.
``(2) In general.--Subject to paragraph (4), every issuer
of a security registered pursuant to section 12 shall show as
an expense in the annual report of such issuer filed under
subsection (a)(2), the fair value of all options to purchase
[[Page H6012]]
the stock of the issuer granted after December 31, 2004, to a
named executive officer of the issuer.
``(3) Fair value.--
``(A) In general.--The fair value of an option to purchase
the stock of the issuer that is subject to paragraph (2)
shall--
``(i) be equal to the value that would be agreed upon by a
willing buyer and seller of such option, who are not under
any compulsion to buy or sell such option; and
``(ii) take into account all of the characteristics and
restrictions imposed upon the option.
``(B) Pricing model.--To the extent that an option pricing
model, such as the Black-Scholes method or a binomial model,
is used to determine the fair value of an option, the assumed
volatility of the underlying stock shall be zero.
``(4) Exemptions.--
``(A) Small business issuers.--This subsection shall not
apply to an issuer, if--
``(i) the issuer has annual revenues of less than
$25,000,000;
``(ii) the issuer is organized under the laws of the United
States, Canada, or Mexico;
``(iii) the issuer is not an investment company (as such
term is defined under section 3 of the Investment Company Act
of 1940 (15 U.S.C. 80a-3));
``(iv) the aggregate value of the outstanding voting and
non-voting common equity securities of the issuer held by
non-affiliated parties is less than $25,000,000; and
``(v) in the case of an issuer that meets the criteria in
clauses (i) through (iv) and is a majority-owned subsidiary,
the parent of the issuer meets the requirements of this
paragraph.
``(B) Delayed effectiveness.--The requirements of this
subsection shall not apply to an issuer before the end of the
3-year period beginning on the date of the completion of the
initial public offering of the securities of the issuer, and
shall only apply to an option to purchase the stock of an
issuer granted after such date.''.
SEC. 3. PROHIBITION ON EXPENSING AND ECONOMIC IMPACT STUDY.
(a) Prohibition.--Section 19(b) of the Securities Act of
1933 (15 U.S.C. 77s(b)) is amended by adding at the end the
following:
``(3) Prohibition on expensing standards.--
``(A) In general.--The Commission shall not recognize as
`generally accepted' any accounting principle relating to the
expensing of stock options unless--
``(i) it complies with the requirements of subparagraph
(B); and
``(ii) the economic impact study required under section
3(b) of the Stock Option Accounting Reform Act has been
completed.
``(B) Requirements.--A standard referred to in subparagraph
(A) shall require that--
``(i) if an option to purchase the stock of an issuer that
is subject to the requirements of section 13(m) of the
Securities Exchange Act of 1934 is exercised--
``(I) any expense that had been reported under that section
13(m) with respect to such option shall be recomputed as of
the date of exercise and shall be equal to the difference
between the price of the underlying stock and the exercise
price; and
``(II) to the extent the recomputed amount differs from the
amount previously reported under section 13(m) with respect
to such option, the difference shall be reported in the
fiscal year in which the option is exercised as a reduction
or increase, as the case may be, of the total expense
required to be reported under that section 13(m) during that
fiscal year;
``(ii) if an option to purchase the stock of an issuer that
is subject to the requirements of section 13(m) of the
Securities Exchange Act of 1934 is forfeited or expires
unexercised, any expense that had been reported under that
section 13(m) with respect to such option shall be reported
in the fiscal year in which the option expires or is
forfeited as a reduction of the total expense required to be
reported under that section 13(m) during that fiscal year;
and
``(iii) to the extent that any reduction required under
clause (i) or (ii) exceeds total option expenses for any
fiscal year, such excess shall be reported as income with
respect to options to purchase the stock of the issuer.''.
(b) Economic Impact Study.--Not later than 1 year after the
date of enactment of this Act, the Secretary of Commerce and
the Secretary of Labor shall conduct and complete a joint
study on the economic impact of the mandatory expensing of
all employee stock options, including the impact upon--
(1) the use of broad-based stock option plans in expanding
employee corporate ownership to workers at a wide range of
income levels, with particular focus upon non-executive
employees;
(2) the role of such plans in the recruitment and retention
of skilled workers;
(3) the role of such plans in stimulating research and
innovation;
(4) the effect of such plans in stimulating the economic
growth of the United States; and
(5) the role of such plans in strengthening the
international competitiveness of businesses organized under
the laws of the United States.
SEC. 4. IMPROVED EMPLOYEE STOCK OPTION TRANSPARENCY AND
REPORTING DISCLOSURES.
(a) Enhanced Disclosures Required.--Not later than 180 days
after the date of enactment of this Act, the Commission
shall, by rule, require each issuer filing a periodic report
under section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m, 78o(d)) to include in such report
more detailed information regarding stock option plans, stock
purchase plans, and other arrangements involving an employee
acquisition of an equity interest in the company. Such
information shall include--
(1) a discussion, written in ``plain English'', in
accordance with the Plain English Handbook published by the
Office of Investor Education and Assistance of the
Commission, of the dilutive effect of stock option plans,
including tables or graphic illustrations of such dilutive
effects;
(2) expanded disclosure of the dilutive effect of employee
stock options on the issuer's earnings per share;
(3) prominent placement and increased comparability and
uniformity of all stock option related information;
(4) the number of outstanding stock options;
(5) the weighted average exercise price of all outstanding
stock options; and
(6) the estimated number of stock options outstanding that
will vest in each year.
(b) Definitions.--As used in this section:
(1) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(2) Issuer.--The term ``issuer'' has the meaning provided
in section 2(a)(7) of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7201(a)(7)).
(3) Equity interest.--The term ``equity interest'' includes
common stock, preferred stock, stock appreciation rights,
phantom stock, and any other security that replicates the
investment characteristics of such securities, and any right
or option to acquire any such security.
SEC. 5. PRESERVATION OF AUTHORITY.
Nothing in this Act shall be construed to limit the
authority over the setting of accounting principles by any
accounting standard setting body whose principles are
recognized by the Securities and Exchange Commission under
section 19(b)(1) of the Securities Act of 1933 (15 U.S.C.
77s(b)(1)).
The CHAIRMAN pro tempore. No amendment to the committee amendment is
in order except those printed in House Report 108-616. Each amendment
may be offered only in the order printed in the report, by a Member
designated in the report, shall be considered read, shall be debatable
for the time specified in the report, equally divided and controlled by
a proponent and an opponent, shall not be subject to amendment, and
shall not be subject to demand for division of the question.
It is now in order to consider amendment No. 1 printed in House
Report 108-616.
Amendment No. 1 Offered by Mr. Oxley
Mr. OXLEY. Mr. Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Oxley:
At the end of subsection (m)(4)(B) of the matter proposed
to be inserted by section 2 of the bill, strike the close
quotation mark and following period and insert the following:
``(5) Voluntary expensing.--Notwithstanding the
requirements of this subsection, issuers may elect to expense
the fair value of all officer and employee stock options in
the annual report of such issuer under subsection (a)(2), in
accordance with the expensing alternative of Statement of
Financial Accounting Standards Number 123, and any such
issuer making such election in the annual report for a fiscal
year shall not be subject to paragraphs (2) through (4) of
this subsection for such fiscal year.''.
At the end of paragraph (3)(B) of the matter proposed to be
inserted by section 3 of the bill, strike the close quotation
mark and following period and insert the following:
``(C) Exception for voluntary expensing.--Nothing in this
paragraph or in any other provision of the Stock Option
Accounting Reform Act shall prevent the Commission from
continuing to recognize the expensing alternative of
Statement of Financial Accounting Standards Number 123 as
part of generally accepted accounting principles for issuers
that elect to expense the fair value of all officer and
employee stock options in the annual report of such issuer
pursuant to section 13(m)(5) of the Securities Exchange Act
of 1934.''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 725, the
gentleman from Ohio (Mr. Oxley) and a Member opposed each will control
5 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
The manager's amendment to H.R. 3574 makes an important clarification
to the bill as reported by the Committee on Financial Services. The
bill was never designed to prevent any company that either currently
expenses its employee stock options or wishes to do so in the future
from doing so. The manager's amendment makes it explicit that a company
that wishes to voluntarily expense its employee stock options may do so
based on the expensing rules that companies are using today to expense
their stock options.
The bill's requirement that companies expense the employee stock
options with the five top executives would not apply to any company
that voluntarily expenses all of its employee stock options under
current rules.
Mr. Chairman, this is an important distinction, because if companies
feel
[[Page H6013]]
it is important to expense these stock options, if they feel they may
perhaps have a competitive advantage over competitors, they may choose
to do so. It literally is a free country, and they have that
obligation. This amendment simply clarifies that option that all
companies, publicly traded companies, have; and I urge my colleagues to
support the manager's amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, we have no objection to the manager's
amendment and support it.
Mr. OXLEY. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentleman from Ohio (Mr. Oxley).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 2 printed in House Report 108-616.
Amendment No. 2 Offered by Mr. Sherman
Mr. SHERMAN. Mr. Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Mr. Sherman:
In subsection (m) of the matter proposed to be inserted by
section 2 of the bill, strike
``(3) Fair value.--
``(A) In general.--The''.
and insert
``(3) Fair value.--The''.
In subsection (m)(3) of the matter proposed to be inserted
by section 2 of the bill, strike subparagraph (B).
The CHAIRMAN pro tempore. Pursuant to House Resolution 725, the
gentleman from California (Mr. Sherman) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentleman from California (Mr. Sherman).
Mr. SHERMAN. Mr. Chairman, I yield myself 1 minute.
Mr. Chairman, this bill is packaged as a bill that requires the
expensing of stock options that are issued to the top five executives
of every company. This amendment allows the bill to achieve its stated
purpose.
The bill, in fact, when one reads the fine print, says that in
calculating the value of options given to the top five executives of
the company, one does not use either of the two formulas that are
established. One does not use the best estimate. But one instead
assumes that the stock does not go up or down in price over time, an
absurd assumption, an assumption that yields a zero valuation for the
stock options given to many top executives in this country.
If we adopt this amendment, then the bill will at least achieve the
purpose it sets, namely, that we will have a fair expense reported on
the income statement for options given to the top five executives.
Mr. Chairman, I reserve the balance of my time.
Mr. OXLEY. Mr. Chairman, I rise in opposition to the amendment, and I
yield myself such time as I may consume.
Mr. Chairman, as I say, we have debated this amendment in committee,
and it was defeated on a vote of 13 ayes and 43 nays, precisely because
while the gentleman's intentions I think are good, as debate in the
committee clearly showed, this amendment, should it be adopted, would,
frankly, confuse investors far more than it would educate them.
{time} 1315
An options value is estimated by applying an options pricing model at
the date the option is granted.
It was interesting that one national accounting firm, which
incidentally supports expensing, wrote FASB last year to support zero
volatility, something that the Sherman amendment would bring into
question. ``We believe that using zero as the expected volatility of
the stock price would increase the reliability of option values.''
So what we are trying to do with the underlying bill is not only
provide the top five executives with the need to expense stock options,
but also to give the investing public the kind of information they need
so they can compare apples to apples in this regard; and unfortunately,
the Sherman amendment does just quite the opposite.
So for those reasons, I would oppose the Sherman amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. SHERMAN. Mr. Chairman, I yield 2 minutes to the gentleman from
Delaware (Mr. Castle).
Mr. CASTLE. Mr. Chairman, I rise in very, very strong support of the
Sherman amendment. We need to understand there is $126 billion in stock
options granted in any one year, there was in 2000 in the United States
of America. We are talking about small potatoes here, and frankly, the
underlying bill here, in my judgment, is completely wrong in terms of
the direction that the country and the stockholders are going. Who is
speaking here for the stockholders of America, for those who have their
value diluted because of what happens with stock options without any
expensing whatsoever?
I yield to the gentleman from California (Mr. Sherman) in terms of
his knowledge about accounting, but what I know about volatility is
that without volatility, you would not have anybody in the stock market
whatsoever. Without volatility, you really have no value in terms of
the stock options which are being granted. Without volatility, that
means you basically are not really expensing the stock options so that
the other stockholders and other potential investors can see what is
happening out there.
For all these reasons, I believe absolutely we should pass this
amendment in order to insert the measure of what these expenses are
really worth by putting the volatility back into it. It is almost
impossible to determine value if you do not do that.
And I might just add, while we are talking about this, that in the
area of accounting, we can talk about Black-Scholes being imprecise and
laugh about it, whatever it might be, and certainly it is imprecise,
but so is sometimes the good will, depreciation and a whole series of
other accounting measures that are used in determining the values of
corporations. It is not all quite as black and white as everybody would
like.
So for all these reasons, but mostly because it is the stockholders,
the shareholders who are suffering, by far the largest bulk. It is not
the CEOs running the companies. It is not even the employees of the
companies. It is the stockholders of the companies who are, in my
judgment, being faulted by the methodology which we use now.
For all these reasons, I would encourage everyone here to consider
supporting the Sherman amendment.
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. Toomey).
Mr. TOOMEY. Mr. Chairman, I thank the chairman for yielding me this
time and commend him and the subcommittee chairman for their work on
this legislation, as well as my colleagues on the other side of the
aisle.
But I wanted to continue this discussion that we have had in
committee, that I have had with the gentleman from California about
this issue.
See, I do not think that the best argument for having zero as our
volatility number is actually a plausible argument, that valuing these
options is inherently a very difficult task and assigning the
appropriate volatility is very difficult.
I prefer the argument that we should not be expensing these at all.
See, I think what some of my colleagues are confusing here is the
difference between value and expense. Nobody is disputing that a stock
option has value, but what I would dispute very vigorously is that
issuing an option is equal to an expense on the part of the company
issuing it.
Let us look at what happens. You grant an option to an employee.
There is no cash outlay, and in fact, if that option expires worthless,
there never will be a cash outlay. And, yet, if this amendment were to
be adopted and became law, you would have to show an expense on an
income statement in which no expense ever is incurred. And it is not
just the options that expire worthless; in most cases, options that
expire in the money are not bought out by the company. If they are,
then current law requires that that cash event be represented on the
income statement as it should be. But in fact, that expiration, most
options that expire in the money are dealt with by a company issuing
new shares. Again, there is no expense. There is no cash event. It
never happens. There is a dilution in earnings, and that needs to be
represented.
[[Page H6014]]
But what the gentleman is proposing in this amendment is to make a
difficult situation worse.
I respect the compromise that is in this bill. If I could write it, I
would write it differently, but I think it makes much more sense than
what FASB is proposing and much more sense than what this amendment
suggests, because this amendment suggests that we knowingly and
systematically list an expense on an income statement even when it is
not going to be incurred, and we never correct for that. So I would
urge my colleagues to vote ``no'' on this amendment.
Mr. SHERMAN. Mr. Chairman, I yield myself such time as I may consume.
We are told by the gentleman from Pennsylvania that you should not
list an item as expense on the income statement unless cash leaves the
company. What if stock options were given to a health insurance company
in return for providing health insurance to the employees? Everyone in
this hall agrees that would be listed as an expense. What if a company
issues stock in return for employee services or stock in return for
supplies? Everyone agrees that would be listed as an expense.
Again and again, when a company is getting supplies, when it is
rewarding its rank-and-file employees, when it is providing health
care, everybody agrees you list that as an expense, even if no cash
leaves the treasury of the company. And, yet, we are asked to make one
exception, and that is for executive compensation.
Keep in mind the vast majority of these options are going to top
executives. Thirty percent of the options are going to just the top
five individuals. Now, there is a compromise that is set forward by the
authors of this bill, and that is that at least the options going to
the top five are going to be expensed. That is the compromise stated in
the title of the bill.
And yet, when you look at the details, you see that roughly a quarter
of the companies in this country expense stock options. Some use the
binomial method. Some use Black-Scholes. No one uses the phony method,
also known as the minimum-value method, under which you say you are
expensing stock options, but assume zero volatility, a unique approach
used only to conceal what the bill would accomplish.
Mr. Chairman, I yield back the balance of my time.
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
Let me say this debate raged in the committee. I think the committee
made a wise choice in defeating that. It only got 14 votes and 33
against because of some of the arguments that were purported from
members on both sides of the aisle regarding the innate confusion the
gentleman's amendment would cause to the investing public.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Pennsylvania (Mr. Toomey).
Mr. TOOMEY. Mr. Chairman, I thank the gentleman for yielding.
I would just make one brief further point, and that is, I think what
accounting is supposed to be all about is providing the most accurate
information, and by ``accurate,'' I think we mean information that
either immediately or at least in time converges with economic reality.
We do not want corporations to be showing income or expenses that never
occur. That is common sense, but that is the reality we are dealing
with here.
And what this amendment does is it moves us away from that
convergence to economic reality, and I think the underlying bill does a
better job of capturing that economic reality, which ultimately in the
case of stock options, I believe, should be primarily captured by
showing the dilution that occurs in the form of new stock that is
issued.
Mr. OXLEY. Mr. Chairman, I yield as much time as he might consume to
the gentleman from Kansas (Mr. Ryun).
Mr. RYUN of Kansas. Mr. Chairman, I want to speak in opposition to
the amendment. I want to thank the gentleman from Louisiana (Mr. Baker)
for drafting this thoughtful and thorough legislation.
I believe the approval of H.R. 3574 is essential to the economic
well-being of many businesses, most significantly, many small
businesses. As for the gentleman's amendment, while H.R. 3574 only
requires the expensing of stock options granted to the top five
employees of a given company, it is still necessary to accurately
determine a value for the option to be expensed. Determining this value
has proven tedious at best and extremely inconsistent and inaccurate at
worst.
One of the reasons for the unreliability of these valuations is the
requirement to factor in the anticipated volatility of a company's
future stock prices. The value has proven virtually impossible and
actually difficult to determine and is highly susceptible to error and
manipulation.
I urge my colleagues to reject this amendment.
Mr. Chairman, I want to speak in opposition to the gentleman's
amendment.
Mr. Chairman, I want to thank my friend, Mr. Baker, for drafting this
thoughtful and thorough legislation. I believe that the approval of
H.R. 3574 is essential to the economic wellbeing of many businesses,
most significantly many small businesses.
As for the gentleman's amendment, while H.R. 3574 only requires the
expensing of stock options granted to the top five employees of a given
company, it is still necessary to accurately determine a value for the
options to be expensed. Determining this value has proven tedious at
best and extremely inconsistent and inaccurate at worst.
One of the reasons for the unreliability of these valuations is the
requirement to factor in the anticipated volatility of a company's
future stock price. This value has proven virtually impossible to
accurately determine and is highly susceptible to error and
manipulation. By setting the volatility to zero, we greatly reduce the
possibility of manipulation. Some have incorrectly stated that setting
volatility to zero will result in an expense value of zero. This is
inaccurate. Other factors, including the underlying price of the stock,
the exercise price of the option, and the life of the option will still
be used to determine a value for the option.
I urge my colleagues to defeat the amendment.
Mr. OXLEY. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN pro tempore (Mr. LaHood). The question is on the
amendment offered by the gentleman from California (Mr. Sherman).
The question was taken; and the Chairman pro tempore announced that
the noes appeared to have it.
Mr. SHERMAN. Mr. Chairman, I demand a recorded vote.
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from California
(Mr. Sherman) will be postponed.
Amendment No. 3 Offered by Mrs. Maloney
Mrs. MALONEY. Mr. Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 3 offered by Mrs. Maloney:
At the end of the bill, insert the following:
SEC. 5. CONFIRMATION OF S.E.C. AUTHORITY.
Nothing in this Act shall be construed to impair or limit
the authority of the Commission to establish accounting
principles or standards on its own initiative as the
Commission deems necessary in the public interest or for the
protection of investors.
The CHAIRMAN pro tempore. Pursuant to House Resolution 725, the
gentlewoman from New York (Mrs. Maloney) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentlewoman from New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Chairman, I yield myself such time as I may
consume.
My amendment preserves the full power of the SEC to determine what
companies report and how they report it. This power was given to the
SEC in 1934 after the accounting scandals in the 1920s and 1930s. My
amendment preserves the current authority to protect investors and the
public interest.
Under present law, and I quote from the law, if ``the SEC determines
that the public interest or the protection of investors so requires,''
it can set an accounting standard even if it has to override another
law to do so, but only to protect the public interest.
This underlying bill takes away the SEC's power to protect investors.
It would prevent the SEC from adopting any accounting standard, except
the one set in the underlying bill.
So I would urge my colleagues on both sides of the aisle to be very
careful with their vote on this amendment. If you vote against this
amendment, you will be walking away from accounting standards that are
set on the
[[Page H6015]]
principle of protecting the 84 million investors in our country and
moving to a different standard, one that does not focus on protecting
investors but gives a competitive advantage to a small number of
companies.
This amendment protects investors. This amendment saves independent
accounting standard setting, and this amendment prevents this body from
making what Alan Greenspan called, ``a bad mistake.'' And it is
expressly supported by Arthur Levitt, Warren Buffett, John Bogle, the
founder of the first mutual fund, and many other financial experts.
So I hope that this body will listen to the overwhelming views of
financial experts and professionals and protect investors by supporting
my amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. OXLEY. Mr. Chairman, I rise in opposition to the amendment, and I
yield myself such time as I may consume.
Let me first say, while I oppose the amendment, the gentlewoman from
New York has made an excellent contribution to the committee on a
number of fronts, and we appreciate her efforts. We just happen to
disagree on this particular amendment.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Louisiana (Mr. Baker).
Mr. BAKER. Mr. Chairman, I thank the gentleman for yielding me this
time.
This, of course, is an important amendment, and we should not forget
for a moment that the lawmaking business is a very difficult course to
follow. If one introduces a measure in the House of Representatives, it
may be subject to numerous hearings and, of course, examination by many
people over the course of many months, in some cases, years. It then
must go to the United States Senate, where it goes through a similar
process.
Assuming the House and Senate may disagree, there is an extensive
conference committee process. Ultimately, if passed by both Houses as a
conference committee report, it goes on to the President of the United
States, either for his signature or for his veto.
What is contemplated by the gentlewoman's amendment is to
dramatically alter the course of public policy consideration. If one
were to take, for example, the 1934 Securities Act, considered after
many, many months of deliberation and debate, I would point out that we
start in the United States Congress or in the United States Senate.
Both Houses meet, deliberate, hear witnesses, stakeholders, public
comment, lobbyists abound, even FASB running around through the halls,
and ultimately we pass a bill out that makes its way to the White
House, and the White House may or may not sign or choose to veto such a
proposal.
The effect of the gentlewoman's amendment from New York would be to
say after that lengthy process which, by the way, in the case of the
stock option expensing debate has raged now for some time, after
considerable hearings within the House Committee on Financial Services,
even the cursory examination in the Committee on Energy and Commerce,
now this public debate on the House floor.
And might I remind you we are now officially in an open public
comment period by FASB, which we all of course know is closed, but for
the sake of public discourse, we have an open public comment period. I
would suggest the Congress is getting ready to comment on the matter.
What some are proposing with the Maloney amendment in the last
circling at the end of the chart is that it would be the ``oops''
provision. The SEC could say, ``Oops, the Congress got it wrong. The
President got it wrong. We are simply going to disregard the actions of
our public policymakers and decide we are going to do it differently.''
{time} 1330
Nowhere in the text of the public policy is there an arbitrary and
capricious grant of authority for any bureaucratic enterprise to set
aside the public policy determinations of the United States Congress.
This, in fact, would be a first.
Now, I understand the dispute over the underlying reform proposal;
but this, I suggest to Members of the House, is not an appropriate
remedy for the concerns expressed by Members opposed to this H.R. 3574.
Should you be opposed to it, I suggest you vote against this measure
and simply vote against the bill on final passage. However, I, for one,
think it an extremely well-crafted remedy to the identified problem and
urge my colleagues to support it on final passage.
Mrs. MALONEY. Mr. Chairman, I yield 1 minute to the gentleman from
Delaware (Mr. Castle).
Mr. CASTLE. Mr. Chairman, I have a different solution than the
gentleman from Louisiana (Mr. Baker). I would suggest that we vote for
the Maloney amendment and then against the underlying legislation,
because the Maloney amendment would reinstate where all of this should
be with the SEC. Have we not had enough corporate malfeasance in this
country, say for the last decade?
We should let the SEC do the job that they are supposed to do. They
are charged with the responsibility of dealing with this. It has the
authority to establish financial reporting standards applicable to
public companies since its inception. This bill would limit that
authority for the first time ever, preventing the SEC from adopting an
accounting standard for stock options even if it finds that it is
needed to protect the interest of the public or the investors.
It prevents the SEC from performing one of its most important
functions, establishing those accounting standards. It is that simple.
That is where the expertise is.
I love the chart the gentleman from Louisiana (Mr. Baker) had up
there because eventually it showed that the regulators are the ones who
are going to make the decisions. Perhaps they are better equipped to
make these kinds of decisions. Perhaps people should sit down and talk
to the FASB people and to the SEC people and understand that is where
the decision should be made with respect to the expensing of stock
options. Vote for the Maloney amendment.
The CHAIRMAN pro tempore (Mr. LaHood). The time remaining is 1\1/2\
minutes on each side.
Mrs. MALONEY. Mr. Chairman, I yield the balance of my time to the
gentleman from Massachusetts (Mr. Frank), the ranking member of the
Committee on Financial Services.
The CHAIRMAN pro tempore. The gentleman is recognized for 90 seconds.
Mr. FRANK of Massachusetts. Mr. Chairman, I welcome the gentleman
from Louisiana's (Mr. Baker) concern for congressional prerogative and
not excessive delegation. I just wish it extended to the war power and
a few other trivial matters.
On this particular subject, the gentlewoman's amendment is quite
sensible. We have had criticism of the FASB arguing that they are going
to make a decision that has broader public policy implications on
grounds that are too technical. The gentlewoman's amendment gets us out
of that box. And I have some sympathy with that argument because I do
not think the FASB ought to go ahead, but I do not want to set the
precedent of overturning the regulators.
What her amendment does is to say, okay, it will not be up to the
FASB, making a narrow technical accounting decision; it will be up to
the Securities and Exchange Commission and specifically instructs them
to take into account the public interest. In other words, it seems to
me that this is what Members have been saying, that this decision
obviously should not ignore accounting principles but that should be
leavened by a concern for the public interest. So it is not simply a
repeat of the whole bill. It does say it will not be up only to the
FASB as current law would allow it, but it does say we will let the SEC
make that decision.
As to the argument this would somehow let the SEC overrule Congress,
we would be voting to say to the SEC, here, we think based on invested
protection and the public interest, you should make that decision. It
would not be setting any precedent of overruling us or giving away our
authority at all.
I would love to have a consistent regard for congressional authority.
I wish we could do it with regard to overtime rules and the war powers.
This is not one of those problems.
[[Page H6016]]
Mr. OXLEY. Mr. Chairman, I yield 45 seconds to the gentlewoman from
California (Ms. Eshoo), who has been enormously helpful throughout this
process and, in fact, testified before the Committee on Financial
Services on this legislation.
Ms. ESHOO. Mr. Chairman, I thank the gentleman from Ohio (Mr. Oxley)
for yielding me time.
Mr. Chairman, I oppose this amendment, and let me state very clearly
why. Number one, this amendment allows the SEC to override what the
Congress wants. I think that stands our process on its head. And I am
not suggesting that our process is always perfect and tidy. I thought
that when I came here that when the Congress legislates and the
executive signs on to that and a bill becomes law that it is up to the
executive branch of government to carry that out.
We have gotten nowhere with this accounting board. They do not want
to sit down and hear the other side of this, which is economic. And so
that is why I urge my colleagues to reject the amendment.
It essentially guts the bill. If you are opposed to stock options for
rank-and-file employees, be opposed to that; but to do this the other
way around, I think really begs the question.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentlewoman from New York (Mrs. Maloney).
The question was taken; and the Chairman pro tempore announced that
the noes appeared to have it.
Mrs. MALONEY. Mr. Chairman, I demand a recorded vote.
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentlewoman from New York
(Mrs. Maloney) will be postponed.
It is now in order to consider amendment No. 4 printed in House
Report 108-616.
Amendment No. 4 Offered by Mr. Kanjorski
Mr. KANJORSKI. Mr. Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 4 offered by Mr. Kanjorski:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Accounting Standards
Integrity Act''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The Securities and Exchange Commission has broad
authority to prescribe accounting standards applicable to
issuers of publicly traded securities, and generally has
relied on the Financial Accounting Standards Board to
establish generally accepted accounting standards for private
sector businesses.
(2) Objective accounting standards are essential to the
efficient functioning of the economy and the capital markets,
as investors, creditors, analysts, auditors, and others rely
on credible, transparent, and comparable results of
operations in making decisions regarding the allocation of
capital.
(3) Congress recently acknowledged the importance of the
accounting standard-setting process to our capital markets
and strengthened the the Financial Accounting Standards
Board's independence as part of the Sarbanes-Oxley Act of
2002, which passed the House of Representatives and the
Senate by votes of 423-3 and 99-0, respectively.
(4) Congress, in the Sarbanes-Oxley Act of 2002, also
recognized the importance of the convergence of United States
and international accounting standards on high quality
accounting standards.
(5) The United States capital markets enjoy a competitive
advantage as a result of the high quality and integrity of
our financial reporting system and the accounting standards
that underlie it and would lose that advantage over foreign
markets if our accounting standards and policies are
considered less than objective.
(6) Investors benefit from independent and fair accounting
standards that are free from undue political interference.
(7) The rulemaking authority and credibility of the
Financial Accounting Standards Board may be irreparably
damaged by legislation that preempts the existing public and
fair deliberative process.
(8) The Securities and Exchange Commission of the United
States has the ultimate authority over the content and
process for setting standards for issuers of publicly traded
securities.
SEC. 3. SENSE OF THE CONGRESS.
It is the sense of Congress that--
(1) preserving the integrity of the accounting standard-
setting process and the independence of the Financial
Accounting Standards Board is crucial to the functioning and
transparency of the financial reporting systems and capital
markets of the United States; and
(2) the Securities and Exchange Commission should be
permitted to recognize or adopt new accounting standards
without Congress or other parties intervening in the process
before it is completed to override or delay recognition of
those standards.
SEC. 4. SECURITIES AND EXCHANGE COMMISSION MANDATE.
Consistent with its established procedures, the Securities
and Exchange Commission shall--
(1) oversee the process of accounting standard-setting to
ensure a process that assures that all of the comments,
concerns, and recommendations gathered during the comment
period on any proposal regarding equity-based compensation
are subject to appropriate review; and
(2) before a final standard is adopted, ensure that any
modifications are made that are appropriate for the purposes
of adopting the highest quality accounting standards that
will best serve the purposes of our financial reporting
system and the United States economy as a whole.
The CHAIRMAN pro tempore. Pursuant to House Resolution 725, the
gentleman from Pennsylvania (Mr. Kanjorski) and the gentleman from Ohio
(Mr. Oxley) each will control 10 minutes.
The Chair recognizes the gentleman from Pennsylvania (Mr. Kanjorski).
Mr. KANJORSKI. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, the Kanjorski-Castle-Dingell-Maloney-Emanuel substitute
is simple in its structure and intent. In short, it would replace the
current text of H.R. 3574 with language designed to preserve the
independence of the Financial Accounting Standards Board in
establishing accounting standards.
Specifically, the substitute incorporates a series of findings
concerning SEC authority over standards setting and the importance of
credible accounting standards to the economy and investors. It also
puts forward a sense of Congress that preserving the integrity of the
accounting standards setting process is crucial to the financial
reporting systems and markets.
Finally, it provides direction to the SEC to oversee the process of
setting standards for equity-based compensation to ensure that all
comments, including those of the high-tech industry, are appropriately
reviewed and that any modifications necessary to ensure the highest
quality accounting standards are adopted.
Mr. Chairman, deciding what should be accounted for and how it should
be accounted for is the job of the Financial Accounting Standards
Board, not the Congress. As a Washington Post recently editorialized,
``The accounting standards, like interest rates and determinations of
drug safety, should not be set by Congress.'' They should be set by the
experts at the Financial Accounting Standards Board.
Moreover, we should not start proceeding down a slippery slope of
establishing accounting standards via political process. As the
Financial Accounting Foundation has noted, ``Once Congress starts
setting accounting standards through its political process, the
integrity of the United States accounting standards-setting and the
credibility of the U.S. financial reporting will be dangerously
compromised.''
In short, we should ensure that the Congress does not become an
appellate court for accounting standards. I hope my colleagues,
therefore, would support our bipartisan substitute.
Mr. Chairman, I reserve the balance of my time.
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentleman from
California (Mr. Dreier), the chairman of the Committee on Rules.
Mr. DREIER. Mr. Chairman, I thank my friend for yielding me time. I
congratulate him on the role that he has played in getting us to this
point.
I rise in strong opposition to this substitute because just as the
amendment that was proposed by my friend, the gentlewoman from New York
(Mrs. Maloney), it basically guts the bill. I believe it is very
important for us to recognize that the United States Congress has a
very important role here. We all recognize the independence of the
Financial Accounting Standards Board, the Securities and Exchange
Commission, but the United States Congress has oversight
responsibility. And we have important oversight responsibility,
especially in light of the fact that we are looking at a provision
which is so amorphous, because no one
[[Page H6017]]
has been able to actually quantify exactly what the value of these
options is. Whether it is Black-Scholes or binomial, virtually everyone
has come to the conclusion that it is impossible, impossible for us to
accurately do it no matter how hard we try to base it on a balance
sheet.
But I think the important point that needs to be raised and why I am
so strongly opposed to this substitute, which again would undermine the
whole basis of what it is that we are trying to do with this
legislation, is we are forgetting the fact that while the Financial
Accounting Standards Board, the SEC, may not focus on the issues of
economic growth, every single day we, as Members of Congress, have a
responsibility to do what we can to make sure that we take steps to
unleash the creative potential of the American worker. And that
improves the quality of life, the standard of living for people here in
the United States and around the world.
So I believe that it would be a real mistake for us to pass this
substitute. We need to do everything we can to make sure that we as
Members of the United States Congress encourage productivity, encourage
innovation and make sure we have economic growth succeed.
Oppose this substitute and support final passage on the bill.
Mr. KANJORSKI. Mr. Chairman, I yield 3 minutes to the gentleman from
Delaware (Mr. Castle), a co-sponsor of the substitute amendment.
Mr. CASTLE. Mr. Chairman, I thank the gentleman for yielding me time.
I would like to paint a little bit of a different picture here. Let
us assume instead of Members of Congress, these 435 seats were filled
with stockholders of various companies in this country, and I said,
look, we have $126 billion worth of expenses to the various
corporations, but you will never see it because we will do it without
any kind of an entry whatsoever.
That is what this is really all about. That is what we are dealing
with.
We are really not expensing stock options at all. It is, in my
judgment, ludicrous to suggest that the bill which is before us
actually expenses stock options without any kind of a volatility
standard in them. So we are just letting that go on as we did for some
time.
But what is happening around the United States of America as we speak
here today? What is happening is that a lot of people who are a heck of
a lot more knowledgeable about corporations, equity and running of
corporations than we are, are saying, hey, this is wrong; we need to
expense stock options.
I have these names here; I cannot go through them all. I do not have
time to do that in the 3 minutes I have, but we recognize a lot of
them. Alan Greenspan, Paul Volcker, Warren Buffet, names such as that.
A significant number of people who have looked at this very carefully
have come to the conclusion that we absolutely must do something about
it.
A number of stockholders, as well, have done the same thing. For the
first time ever, public proxies opposed by corporations are actually
passing in the United States of America, some 40 of them this year,
because stockholders have actually spoken out and have actually made
the statement that we are going to do something about this; we are
going to start to expense stock options.
Then, in addition to that, many corporations have looked at this and
they said, we really do not need to have stock options unexpensed. We
can expense them. We can live with that. Or we can issue restricted
stock. There is a whole variety of ways in which we can compensate our
executives and our other employees in a fair manner but in a way that
would be shown to everybody who has invested in the corporation or
might want to invest in the corporation.
Then there are all those companies that are voluntarily expensing
their stock options. Again, I do not have the time to go through all of
them, but Amazon, American Express, AT&T, Capital One, Coca-Cola,
Daimler Chrysler. You name it and they are all beginning to do it.
The proposal which we have before us allows a regulatory body, the
SEC working through FASB, to be able to come up with the fairest
methodology of doing this. They have issued a rule. They are now
listening to whatever the suggestions are. They should perhaps listen
to Congress. I will be the first to tell you that Black-Scholes and
other methodologies are not necessarily precise, but at least we are
showing the expense of stock options so that all of the investors in
this world, well over 50 percent of Americans who have invested in
either mutual funds or corporations, will actually know what the heck
is happening with those corporations.
If we vote for this legislation, we are basically going to brush it
right back under the rug, and that is not where it belongs. So I would
encourage everybody to take a careful look at this substitute which I
think makes a lot of sense in terms of giving FASB the right to
continue to do what they are doing. I would encourage us to look at all
the amendments which are outstanding at this point and to vote for them
and to oppose the legislation when the final say comes for the
stockholders and the people of America.
{time} 1345
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentleman from
Louisiana (Mr. Baker), the chairman of the subcommittee.
Mr. BAKER. Mr. Chairman, I thank the chairman for yielding me time.
Since 1969, the current debate has been in some form or fashion
engaged by FASB, 1969, 35 years. You would not think that that would be
considered a new and innovative strategy to begin expensing or not
expensing options.
In 1995, the current methodology was adopted as a compromise. Yes,
you can expense, if you so choose, determined by your board, driven
perhaps by your shareholders, but you may also disclose in the
footnotes.
What are footnotes? They are notes in the annual report to
shareholders. If you are a shareholder and you are worried about
diluted effect, in other words, they are giving an option to someone,
what does that do to my asset in the company, you can find that out
with an examination of the annual report.
To suggest that this is a new tactic developed by some executive in a
back room to cheat shareholders or Americans out of value gained in
their corporate investment is simply not accurate. This has been a
practice common in the business world for many, many years.
Now, at question is whether or not a handful of executives who are
identified as abusing their privileges ought to be brought to some
account. The answer with the passage of this bill is ``yes.'' If you
are one of the top five executives who, by some accounts, hold the
majority of options granted, you will now be required to expense those
options at the time they are granted to the employee. It does not,
however, require the large number of employees who benefit from
investment, showing up early, staying late, investing their
intellectual and personal capital into the business, who ultimately
benefit from the overall growth and value of that corporation by seeing
their shares increase in value.
Forty-five percent of the venture capital in this country goes to the
Silicon Valley, 45 percent, and the bulk of that goes to these new
technology start-up companies. If my colleagues wish to see them in the
future, please vote for H.R. 3574. It is rational reform headed in the
right direction.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentleman from
Massachusetts (Mr. Frank), the ranking member of the Committee on
Financial Services.
MR. FRANK of Massachusetts. Mr. Chairman, I am delighted to take up
where the previous speaker left off.
No, I do not want to see an end to venture capital in the Silicon
Valley, and my argument is that this is greatly overblown. Here is the
argument; we have just heard it.
We have this very valuable resource in America, these high-tech
start-ups. They are, on the whole, quite productive; they generate
wealth, venture capitalists give them money, and we are being told that
the venture capitalists in America are so stupid that a change in
accounting, which represents no change in reality, will drive them away
from this business.
Now, I agree with those who say that the options are a good thing. I
do not
[[Page H6018]]
think investors are misled. If you are going to invest in a company,
read the footnotes, and if you did not read the footnotes when you
invested, do not complain to me. I have got constituents with real
problems.
On the other hand, the argument that if you change the accounting and
the reality is not changed, remember this has not been the issue.
Nothing about what FASB is proposing would stop the issuance of
options. It simply changes the way they are accounted for literally.
The argument is that the most sophisticated investors in America will
see a change in the accounting and they will say, Oh, my God, I had
better stop investing in these companies; I did not know that they were
doing this. Well, of course they know. Both sides know. No one is
getting any new information out of this.
The question is, if the accounting takes them from a gain on paper to
a loss on paper with no change in reality, will that dry up capital?
Now, I understand where if you are one company out of many and you
did this and others did not, maybe you would be at a disadvantage, but
are venture capitalists so dumb that they do not know what apparently
everybody here does? I think they at least tie us in intelligence and
understanding of economic processes. Are they going to say, Oh, now
that the accounting is changed, now that this is expensed, even though
the realities are the same, I will withdraw my investment? I am wholly
skeptical of that argument.
Mr. OXLEY. Mr. Chairman, I am pleased to yield 2 minutes to the
gentlewoman from California (Ms. Eshoo).
Ms. ESHOO. Mr. Chairman, I thank the gentleman from Ohio for the
time, and Mr. Chairman, I would like to point out a few things here
about the substitute.
First of all, obviously I respect the gentleman from Pennsylvania,
but I do not support the substitute, and let me tell my colleagues why.
There was a chart that was here on the floor a little earlier of
companies that expense. I wish we had a chart on the floor that
demonstrated that those companies that do do not offer stock options to
their rank-and-file employees.
This debate is not about the venture capitalists. They are going to
make their investments. They are going to pick and choose. But this is
a magnet that attracts individuals to form new companies to allow them
to grow and bring them up to profitability. We want to destroy this?
Well, it is going to be in the hands of the Congress to do that. That
is what this debate is about.
Those that have problems with executive compensation have problems
with it. Talk to the board of directors that form those packages, but
rank-and-file employees do not get to negotiate their compensation or
those packages. That is why their stock options are so important.
This substitute does not address FASB's failure to develop accurate
expensing formulas. They are unwilling to even road-test the standards
that they are talking about.
Now, I think that that is really unfair. That is why, as a Member of
Congress, I stepped in. I think we should, and I think it is
appropriate because we do have a responsibility to answer to the
American people about economics and economic impacts on our people.
That is why I urge my colleagues to reject and to vote against the
Kanjorski substitute. It was rejected in the committee and it should be
on the floor.
Mr. KANJORSKI. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman
from Ohio (Mr. Kucinich).
Mr. KUCINICH. Mr. Chairman, I thank the gentleman for giving me an
opportunity to talk about the Stock Option Accounting Reform Act.
This is Alice in Wonderland. The notion that the legislation could be
labeled with such a title originates in a statement by Warren Buffett,
CEO of Berkshire Hathaway.
Why does the second richest man in America oppose a bill that could
conceivably make his company look more profitable? It is because the
bill only makes the profit look better on paper, while the real bottom
line does not change.
The bill perpetuates an accounting gimmick that has harmed far too
many investors. Think Enron.
The bill's suggested method for valuing options could grossly
underestimate their true value and provide an inflated view of a
company's profits. That is misleading to investors who have a right to
accurate information.
Take Intel as an example. If this bill were law, Intel would be able
to overstate their profits by $991 million. If every company can
overstate profits, as this bill allows, then no investor will have
accurate information and our markets will be neither efficient nor
truly free.
I ask my colleagues to vote against H.R. 3574. It is a misleading and
irresponsible bill, and we ought to be here protecting small investors,
and that ought to be a goal of the United States Congress.
Mr. OXLEY. Mr. Chairman, I am pleased to yield 1\1/2\ minutes to the
gentleman from California (Mr. Cunningham).
Mr. CUNNINGHAM. Mr. Chairman, I thank the chairman for the time.
I think that some speakers seem to distrust big business. Some do
need it, but I would tell my colleagues, California was hit extensively
with defense cuts. A lot of the jobs were lost, a lot of not just DOD
but jobs in the high-tech industries, defense and so on.
We have replaced a lot of our businesses with bio-tech, and quite
often the young entrepreneurial company does not have the capital to
start up the business. So what did they do? They reach out to
scientists and say, Hey, we cannot pay you the amount necessary to
study a cure for AIDS or cancer, but we can give you a piece of the
rock.
Some of my colleagues talked about creation of jobs. Well, we have
gotten rid of the high-paying jobs and only have the low-service jobs.
These quite often are high-paying jobs. It is an investment in the
future, not only of the company but for the workers on all levels of
that company that do have stock options. For California, our job market
is improving, primarily of those young entrepreneurial companies. There
are some that want to tax those, put a tax on it, but we think that
that is wrong. When we could create an environment that produces jobs
on all levels of the scientists, all the way from the people that take
out the trash, and that is good, and it means that the economy can
recover; and in the State of California it helps us, and I rise in
strong support of this bill.
Mr. KANJORSKI. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman
from California (Mr. Sherman).
Mr. SHERMAN. Mr. Chairman, I thank the gentleman for yielding me
time.
America has to fight to get capital. China lets its domestic
companies put anything they want on their financial statements. We
respond with independent, nonpolitical, generally accepted accounting
principles written by the FASB, an independent board. Under this bill,
we would have generally political accounting principles. Capital will
go abroad.
No wonder perhaps the best group defending investors, Greenspan,
Buffett, the mutual funds represented by the Investment Company
Institute and the major pension plans representing public employees all
oppose this bill.
We are told that options are broadly based. Thirty percent of the
options goes to the top five executives; the other 70 percent are
narrowly spread among top executives. That is why 80 percent of CEO
compensation in this country comes in the form of stock options.
We are told that it is difficult to do the calculations to expense
stock options, but accountants do much more difficult calculations
already and have for generations.
We are told that we should adopt an absurd accounting standard, one
where if you give an option to the number five person at a company,
that is an expense, but the number six person at the company gets an
option that is not an expense. Only a political body like Congress
would decide that the weights and measures varied dependent upon
whether you are dealing with the number five executive or the number
six executive.
In sum, Mr. Chairman, imposing political standards in an effort to
conceal executive compensation will tarnish America's image for
objective financial
[[Page H6019]]
reporting and hurt our efforts to attract capital from around the
world.
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
This has been an excellent debate, and I have great respect for the
two gentlemen who have offered this substitute, the gentleman from
Delaware (Mr. Castle) and the gentleman from Pennsylvania (Mr.
Kanjorski), but the issue here is whether duly elected public
policymakers, that is, the Congress, have a responsibility to deal with
issues that come into the realm of the economy, job creation, economic
growth and the like, and I think clearly the answer is ``yes.''
How many arguments have we heard about outsourcing? How many
arguments have we heard about the fact that we are falling behind in
the technology gap with Asian countries? How many times have we heard
the arguments about the number of engineers that are produced in other
parts of the world compared to here or in science and the like? How
many times have we heard about the competition out there for good
quality people who have an idea, who want to bring that idea to
fruition?
That is really what employee stock options do. It gives them an
incentive. It incentivizes these folks to work harder and to come up
with more innovations because they have a piece of the action. They own
part of that company, and this is clearly what it is.
The fastest growing area for employee stock options is Asia, and
among the Asian countries, the fastest growing country for creation of
employee stock options is Communist China.
{time} 1400
When our American companies have to compete for talent with Japan and
China and other countries in Asia, and at the same time we have
politicians and pundits complaining about outsourcing and about our
inability to be competitive, do we have to stand back as elected
Members of Congress and say we are willing to allow those decisions to
be made by unelected bureaucrats and the private sector? I say, no.
So this idea that the gentleman from Louisiana (Mr. Baker) came up
with, which deals with that 30 percent, the top five people in a
corporation, this deals directly with that. It says we are going to
have them report those stock options. That is precisely the point
behind this.
If the argument is that somehow all of the business scandals resulted
from the fact that people were abusing stock options, then this bill is
the answer to that problem. I ask Members to oppose the substitute and
for a strong bipartisan vote for final passage.
The CHAIRMAN pro tempore (Mr. LaHood). The question is on the
amendment offered by the gentleman from Pennsylvania (Mr. Kanjorski).
The question was taken; and the Chairman pro tempore announced that
the noes appeared to have it.
Mr. KANJORSKI. Mr. Chairman, I demand a recorded vote.
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Pennsylvania
(Mr. Kanjorski) will be postponed.
Sequential Votes Postponed in Committee of the Whole
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII,
proceedings will now resume on those amendments on which further
proceedings were postponed, in the following order: amendment No. 2
offered by the gentleman from California (Mr. Sherman); amendment No. 3
offered by the gentlewoman from New York (Mrs. Maloney); and amendment
No. 4 offered by the gentleman from Pennsylvania (Mr. Kanjorski).
The Chair will reduce to 5 minutes the time for any electronic vote
after the first vote in this series.
Amendment No. 2 Offered by Mr. Sherman
The CHAIRMAN pro tempore. The pending business is the demand for a
recorded vote on the amendment offered by the gentleman from California
(Mr. Sherman) on which further proceedings were postponed and on which
the noes prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
Recorded Vote
The CHAIRMAN pro tempore. A recorded vote has been demanded.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 126,
noes 296, not voting 11, as follows:
[Roll No. 394]
AYES--126
Abercrombie
Ackerman
Alexander
Andrews
Baldwin
Bass
Becerra
Bell
Bereuter
Berman
Berry
Bishop (NY)
Bono
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Cardin
Castle
Clay
Clyburn
Conyers
Costello
Davis (CA)
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dingell
Doggett
Doyle
Duncan
Ehlers
Emanuel
Evans
Fattah
Filner
Fossella
Frank (MA)
Gilchrest
Gillmor
Grijalva
Gutierrez
Hastings (FL)
Hinchey
Holt
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jones (OH)
Kanjorski
Kaptur
Kleczka
Kucinich
Leach
Lee
Levin
Lewis (GA)
Lipinski
Lowey
Maloney
Markey
Marshall
Matsui
McCollum
McDermott
McNulty
Meek (FL)
Michaud
Millender-McDonald
Miller, George
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Owens
Pallone
Pascrell
Pastor
Payne
Peterson (MN)
Petri
Platts
Pomeroy
Rahall
Rangel
Rodriguez
Rohrabacher
Rothman
Roybal-Allard
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanders
Schakowsky
Serrano
Shays
Sherman
Skelton
Slaughter
Smith (MI)
Solis
Spratt
Stark
Stearns
Strickland
Stupak
Taylor (MS)
Thompson (MS)
Tierney
Udall (CO)
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Weldon (PA)
Wexler
NOES--296
Aderholt
Akin
Allen
Baca
Bachus
Baird
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Beauprez
Berkley
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capuano
Cardoza
Carson (OK)
Carter
Case
Chabot
Chandler
Chocola
Coble
Cole
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cummings
Cunningham
Davis (AL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dooley (CA)
Doolittle
Dreier
Dunn
Edwards
Emerson
English
Eshoo
Etheridge
Everett
Farr
Feeney
Flake
Foley
Forbes
Ford
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gephardt
Gerlach
Gibbons
Gingrey
Gonzalez
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Gutknecht
Hall
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Hill
Hinojosa
Hobson
Hoekstra
Holden
Honda
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Inslee
Israel
Issa
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Lynch
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCotter
McGovern
McHugh
McInnis
McIntyre
McKeon
Meehan
Meeks (NY)
Menendez
Mica
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Mollohan
Moore
Moran (KS)
Moran (VA)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Ortiz
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pelosi
Pence
Peterson (PA)
Pickering
Pitts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reyes
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Royce
Ruppersberger
Ryan (WI)
Ryun (KS)
Sanchez, Loretta
Sandlin
Saxton
Schiff
Schrock
Scott (GA)
Scott (VA)
Sensenbrenner
Sessions
Shadegg
Shaw
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Souder
Stenholm
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thornberry
Tiahrt
Tiberi
Toomey
Towns
Turner (OH)
Turner (TX)
Udall (NM)
Upton
Van Hollen
Velazquez
Vitter
[[Page H6020]]
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NOT VOTING--11
Ballenger
Carson (IN)
Collins
Cooper
Engel
Ferguson
Hoeffel
Isakson
Majette
McCrery
Quinn
{time} 1426
Mrs. WILSON of New Mexico, Ms. KILPATRICK, and Messrs. GUTKNECHT,
WYNN, BRADLEY of New Hampshire, LANTOS and BISHOP of Georgia changed
their vote from ``aye'' to ``no.''
Ms. CORRINE BROWN of Florida, Mr. DEUTSCH and Mr. DINGELL changed
their vote from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
Amendment No. 3 Offered by Mrs. Maloney
The CHAIRMAN pro tempore (Mr. LaHood). The pending business is the
demand for a recorded vote on the amendment offered by the gentlewoman
from New York (Mrs. Maloney) on which further proceedings were
postponed and on which the noes prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
Recorded Vote
The CHAIRMAN pro tempore. A recorded vote has been demanded.
A recorded vote was ordered.
The CHAIRMAN pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 114,
noes 308, not voting 11, as follows:
[Roll No. 395]
AYES--114
Abercrombie
Ackerman
Alexander
Andrews
Baldwin
Becerra
Bereuter
Berman
Berry
Bishop (NY)
Bono
Brady (PA)
Brown (OH)
Capps
Cardin
Castle
Clay
Clyburn
Conyers
Costello
Cummings
Davis (CA)
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dingell
Doyle
Emanuel
Engel
Fattah
Fossella
Frank (MA)
Gilchrest
Gillmor
Grijalva
Gutierrez
Hastings (FL)
Hinchey
Holt
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Johnson (IL)
Jones (NC)
Kanjorski
Kaptur
Kleczka
Kucinich
Leach
Lee
Levin
Lipinski
Lowey
Maloney
Markey
Marshall
Matsui
McCollum
McDermott
McNulty
Miller (NC)
Miller, George
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Owens
Pascrell
Pastor
Payne
Peterson (MN)
Petri
Pomeroy
Rahall
Rangel
Rohrabacher
Rothman
Roybal-Allard
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanders
Schakowsky
Serrano
Shays
Sherman
Slaughter
Solis
Spratt
Stark
Strickland
Stupak
Taylor (MS)
Thompson (MS)
Tierney
Towns
Van Hollen
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Wu
Wynn
NOES--308
Aderholt
Akin
Allen
Baca
Bachus
Baird
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bell
Berkley
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Brown, Corrine
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capuano
Cardoza
Carson (OK)
Carter
Case
Chabot
Chandler
Chocola
Coble
Cole
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (AL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Doggett
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Eshoo
Etheridge
Evans
Everett
Farr
Feeney
Filner
Flake
Foley
Forbes
Ford
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gephardt
Gerlach
Gibbons
Gingrey
Gonzalez
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Gutknecht
Hall
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Hill
Hinojosa
Hobson
Hoekstra
Holden
Honda
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Inslee
Israel
Issa
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson, E. B.
Johnson, Sam
Jones (OH)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Lynch
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCotter
McGovern
McHugh
McInnis
McIntyre
McKeon
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller, Gary
Mollohan
Moore
Moran (KS)
Moran (VA)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Ortiz
Osborne
Ose
Otter
Oxley
Pallone
Paul
Pearce
Pelosi
Pence
Peterson (PA)
Pickering
Pitts
Platts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reyes
Reynolds
Rodriguez
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Royce
Ruppersberger
Ryan (WI)
Ryun (KS)
Sanchez, Loretta
Sandlin
Saxton
Schiff
Schrock
Scott (GA)
Scott (VA)
Sensenbrenner
Sessions
Shadegg
Shaw
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Souder
Stearns
Stenholm
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Turner (TX)
Udall (CO)
Udall (NM)
Upton
Velazquez
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Young (AK)
Young (FL)
NOT VOTING--11
Ballenger
Carson (IN)
Collins
Cooper
Ferguson
Hoeffel
Isakson
Majette
McCrery
Quinn
Smith (MI)
Announcement by the Chairman Pro Tempore
The CHAIRMAN pro tempore (during the vote). Members are advised that
2 minutes remain in this vote.
{time} 1435
Mr. WYNN and Mr. FOSSELLA changed their vote from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
Amendment No. 4 Offered by Mr. Kanjorski
The CHAIRMAN pro tempore (Mr. LaHood). The pending business is the
demand for a recorded vote on the amendment offered by the gentleman
from Pennsylvania (Mr. Kanjorski) on which further proceedings were
postponed and on which the noes prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
Recorded Vote
The CHAIRMAN pro tempore. A recorded vote has been demanded.
A recorded vote was ordered.
The CHAIRMAN pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 127,
noes 293, not voting 13, as follows:
[Roll No. 396]
AYES--127
Abercrombie
Ackerman
Alexander
Andrews
Baldwin
Bass
Becerra
Bell
Bereuter
Berman
Berry
Bilirakis
Bishop (NY)
Bono
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Cardin
Castle
Clay
Clyburn
Conyers
Costello
Cummings
Davis (CA)
Davis (FL)
Davis (IL)
DeFazio
Delahunt
DeLauro
Deutsch
Dingell
Doyle
Emanuel
Engel
Evans
Fattah
Ford
Fossella
Frank (MA)
Gilchrest
Gillmor
Goode
Grijalva
Gutierrez
Hall
Hastings (FL)
Hinchey
Hoeffel
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Johnson (IL)
Jones (OH)
Kanjorski
Kaptur
Kildee
Kleczka
Kolbe
Kucinich
Leach
Lee
Levin
Lipinski
Lowey
Maloney
Markey
Marshall
Matsui
McCollum
McDermott
McInnis
McNulty
Miller, George
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Osborne
Owens
Pascrell
Pastor
Payne
Peterson (MN)
Petri
Platts
Pomeroy
Rahall
Rangel
Rohrabacher
Rothman
Roybal-Allard
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanders
Schakowsky
Scott (VA)
Serrano
Shays
Sherman
[[Page H6021]]
Shimkus
Simmons
Slaughter
Smith (MI)
Solis
Spratt
Stark
Stearns
Strickland
Stupak
Taylor (MS)
Thompson (MS)
Tierney
Towns
Van Hollen
Visclosky
Waters
Watt
Waxman
Weiner
Wexler
NOES--293
Aderholt
Akin
Allen
Baca
Bachus
Baird
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Beauprez
Biggert
Bishop (GA)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capuano
Cardoza
Carson (OK)
Carter
Case
Chabot
Chandler
Chocola
Coble
Cole
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (AL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeGette
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Doggett
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Eshoo
Etheridge
Everett
Farr
Feeney
Filner
Flake
Foley
Forbes
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gephardt
Gerlach
Gibbons
Gingrey
Gonzalez
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Gutknecht
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Hill
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Inslee
Israel
Issa
Istook
Jefferson
Jenkins
John
Johnson, E. B.
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kilpatrick
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Lynch
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCotter
McGovern
McHugh
McIntyre
McKeon
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Mollohan
Moore
Moran (KS)
Moran (VA)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Ortiz
Ose
Otter
Oxley
Pallone
Paul
Pearce
Pelosi
Pence
Peterson (PA)
Pickering
Pitts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reyes
Reynolds
Rodriguez
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Royce
Ruppersberger
Ryan (WI)
Ryun (KS)
Sanchez, Loretta
Sandlin
Saxton
Schiff
Schrock
Scott (GA)
Sensenbrenner
Sessions
Shadegg
Shaw
Sherwood
Shuster
Simpson
Skelton
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Souder
Stenholm
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Terry
Thompson (CA)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Turner (TX)
Udall (CO)
Udall (NM)
Upton
Velazquez
Vitter
Walden (OR)
Walsh
Wamp
Watson
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NOT VOTING--13
Ballenger
Berkley
Carson (IN)
Collins
Cooper
Ferguson
Greenwood
Isakson
Johnson (CT)
Majette
McCrery
Quinn
Thomas
Announcement by the Chairman Pro Tempore
The CHAIRMAN pro tempore (during the vote). Members are advised there
are 2 minutes remaining in this vote.
{time} 1442
Mr. CONYERS changed his vote from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
personal explanation
Mr. McINNIS. Mr. Chairman, during today's consideration of H.R. 3574,
a bill introduced by Representative Baker, I mistakenly voted ``no'' on
one of the amendments to this legislation. Representative Kanjorski
introduced a substitute amendment to H.R. 3574, (rollcall No. 396). I
voted in favor of Representative Kanjorski's amendment. Please let the
Record reflect that I intended to vote against that amendment.
The CHAIRMAN pro tempore. There being no other amendments, the
question is on the committee amendment in the nature of a substitute,
as amended.
The committee amendment in the nature of a substitute, as amended,
was agreed to.
The CHAIRMAN pro tempore. Under the rule, the Committee rises.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Sweeney) having assumed the chair, Mr. LaHood, Chairman pro tempore of
the Committee of the Whole House on the State of the Union, reported
that that Committee, having had under consideration the bill (H.R.
3574) to require the mandatory expensing of stock options granted to
executive officers, and for other purposes, pursuant to House
Resolution 725, he reported the bill back to the House with an
amendment adopted by the Committee of the Whole.
The SPEAKER pro tempore. Under the rule, the previous question is
ordered.
Is a separate vote demanded on the amendment to the committee
amendment in the nature of a substitute adopted by the Committee of the
Whole? If not, the question is on the committee amendment in the nature
of a substitute.
The committee amendment in the nature of a substitute was agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. OXLEY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The vote was taken by electronic device, and there were--yeas 312,
nays 111, not voting 10, as follows:
[Roll No. 397]
YEAS--312
Ackerman
Aderholt
Akin
Allen
Andrews
Baca
Bachus
Baird
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Beauprez
Becerra
Bell
Berkley
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Brown, Corrine
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capuano
Cardoza
Carson (OK)
Carter
Case
Chabot
Chandler
Chocola
Clay
Coble
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
Delahunt
DeLay
DeMint
Deutsch
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Doggett
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Engel
English
Eshoo
Etheridge
Everett
Farr
Feeney
Filner
Flake
Foley
Forbes
Ford
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gephardt
Gerlach
Gibbons
Gonzalez
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Gutknecht
Hall
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Hill
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Inslee
Israel
Issa
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Lynch
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCollum
McCotter
McGovern
McHugh
McInnis
McIntyre
McKeon
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Mollohan
Moore
Moran (KS)
Moran (VA)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Ortiz
Ose
Otter
Owens
Oxley
Pallone
Paul
Pearce
Pelosi
Pence
Peterson (PA)
Pickering
Pitts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Radanovich
Ramstad
Rangel
Regula
Rehberg
Renzi
Reyes
Reynolds
Rodriguez
Rogers (AL)
[[Page H6022]]
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Royce
Ruppersberger
Ryan (WI)
Ryun (KS)
Sanchez, Loretta
Sandlin
Saxton
Schiff
Schrock
Scott (GA)
Sensenbrenner
Sessions
Shadegg
Shaw
Sherwood
Shuster
Simmons
Simpson
Skelton
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Solis
Souder
Stenholm
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Thomas
Thompson (CA)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Turner (TX)
Udall (CO)
Udall (NM)
Upton
Velazquez
Vitter
Walden (OR)
Walsh
Wamp
Watson
Weldon (FL)
Weldon (PA)
Weller
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NAYS--111
Abercrombie
Alexander
Baldwin
Bass
Bereuter
Berman
Berry
Bishop (NY)
Bono
Brady (PA)
Brown (OH)
Capps
Cardin
Castle
Clyburn
Cole
Conyers
Costello
Cummings
Davis (FL)
DeFazio
DeGette
DeLauro
Dingell
Doyle
Emanuel
Emerson
Evans
Fattah
Fossella
Frank (MA)
Gilchrest
Gillmor
Goode
Grijalva
Gutierrez
Hastings (FL)
Hinchey
Hoeffel
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jones (OH)
Kanjorski
Kaptur
Kildee
Kilpatrick
Kleczka
Kolbe
Kucinich
LaHood
Leach
Lee
Levin
Lewis (GA)
Lipinski
Lowey
Maloney
Markey
Marshall
Matsui
McDermott
McNulty
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Osborne
Pascrell
Pastor
Payne
Peterson (MN)
Petri
Platts
Pomeroy
Rahall
Rohrabacher
Rothman
Roybal-Allard
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanders
Schakowsky
Scott (VA)
Serrano
Shays
Sherman
Shimkus
Slaughter
Smith (MI)
Spratt
Stark
Stearns
Strickland
Stupak
Taylor (MS)
Terry
Thompson (MS)
Tierney
Towns
Van Hollen
Visclosky
Waters
Watt
Waxman
Weiner
NOT VOTING--10
Ballenger
Carson (IN)
Collins
Cooper
Ferguson
Gingrey
Isakson
Majette
McCrery
Quinn
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Sweeney) (during the vote). Members are
advised 2 minutes remain in this vote.
{time} 1500
Mr. PAYNE changed his vote from ``yea'' to ``nay.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated for:
Mr. GINGREY. Mr. Speaker, on rollcall No. 397 I was unavoidably
detained. Had I been present, I would have voted ``yea.''
____________________