[Congressional Record Volume 150, Number 103 (Thursday, July 22, 2004)]
[Extensions of Remarks]
[Pages E1487-E1488]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   STOCK OPTION ACCOUNTING REFORM ACT

                                 ______
                                 

                               speech of

                            HON. JANE HARMAN

                             of california

                    in the house of representatives

                         Tuesday, July 20, 2004

   Ms. HARMAN. Mr. Chairman, as a co-sponsor of H.R. 3574, the Stock 
Option Accounting Reform Act, I urge my colleagues to support passage 
of the bill. In order to remain competitive in today's difficult 
economy, America's small businesses need the flexibility to choose how 
to treat their stock options, and I am pleased that Congress is acting 
today on legislation that maintains the discretionary nature of 
expensing stock options. If Congress were to do nothing and allow the 
mandatory stock option expensing proposal to take effect, America's 
small businesses--especially high tech firms--would suffer.
   Particularly for the high tech sector, stock options are critical to 
attracting employees to

[[Page E1488]]

new, start-up companies. Requiring companies to expense their stock 
options would compel many small firms to stop offering the options 
altogether, forcing some to give up the primary tool used to attract 
the best employees. Start-up firms would be especially hard hit because 
it would be increasingly difficult for them to raise capital.
   At a time when U.S. industries are losing jobs overseas, mandatory 
stock option expensing would put small American companies at an even 
greater disadvantage. Many foreign competitors offer stock options to 
create talented work pools. By passing this legislation today, we will 
ensure that U.S. businesses remain competitive and avoid additional 
incentives for U.S. firms to move jobs overseas.
   We need to maintain a balance between increasing transparency to 
outside investors while not burdening technology firms with onerous 
reporting requirements. The Stock Option Accounting Reform Act will 
achieve and maintain that balance. For instance, this legislation 
requires increased disclosure by companies about stock option plans, 
stock purchase plans and similar incentive plans.
   In addition, although the bill keeps the expensing of stock options 
as voluntary, in general, larger companies are required to expense the 
fair value of the stock options issued to their top five corporate 
officers. This proposal will allow each business to make its own 
decision on how to handle stock options issued to medium and low-level 
employees, while achieving a certain degree of transparency for 
investors.
   H.R. 3574 bridges two potentially conflicting goals--rewarding hard 
work and ensuring transparency of corporate actions in the capital 
markets. Enjoying the fruits of one's own labor is a key component of 
the American Dream. For innovative and highly creative ventures like 
high tech, the rewards may be slow to realize--thus inviting the 
issuance of stock options, which will capture a company's future value.
   I support the passage of the Stock Option Accounting Reform Act and 
urge my colleagues to do the same.

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