SAN JOSE, Calif. A proposed rule requiring the expensing of stock option grants would seriously damage the competitiveness of U.S. chipmakers without achieving the goal of uniform financial reporting, according to the Semiconductor Industry Association (SIA).
The SIA expressed opposition to a rule proposed in an exposure draft from the Financial Accounting Standards Board (FASB) on Wednesday (March 31).
"Stock option grants to employees have been an important part of the compensation program that helped drive U.S. high-tech companies to world leadership," said George Scalise, president of the SIA, in a statement. "Stock options have been a powerful incentive for employees of U.S. chipmakers, aligning employee interests with those of shareholders. More than 80 percent of the options granted by SIA members are to employees who are not corporate officers," he said.
"Current plans are very broadly based and give a wide range of employees an opportunity to share in their companies' success. The proposed FASB rule would likely significantly diminish the use of broad based stock option and stock purchase plans and make it more difficult to attract and retain talented employees," he said.
"Opposition to stock option expensing is a primary priority for the high-tech industry," stated William T. Archey, president and CEO of AeA, in a statement. "FASB's proposal drives a dagger into the heart of broad based stock option plans and will force many companies to discontinue option programs and Employee Stock Purchase Plans (ESPP) for their rank-and-file employees. If Congress doesn't act, middle class workers throughout our industry will be the victims of FASB's short-sighted efforts. We believe that there would be virtually no benefit to the investor as the information provided is less transparent than what is currently required," he said.
"High tech companies issue options and ESPPs for virtually all employees a practice quite different from other industries. This is not the time to put greater economic burdens on an industry that has struggled for the last several years and is just coming out of the economic downturn," he said.
Software & Information Industry Association (SIIA) President Ken Wasch agreed. "In a move touted as a step to improve financial transparency and enhance the ability of investors to evaluate corporate performance, FASB has actually accomplished the opposite," he said in a statement. "By requiring all companies to expense the value of employee stock options, absent a method to accurately value the options,corporate balance sheets will become less transparent, not more."