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Options Reform Faces Roadblocks

A year ago there was tremendous momentum behind the idea that stock options should be expensed. But with the stock market rebounding sharply and many companies -- particularly technology firms -- fighting tooth and nail to preserve their right to use options, much has changed. Heading into 2004, such crosscurrents threaten to overwhelm the push toward option expensing.

Stock options were tarnished by the accounting scandals at Enron, WorldCom and other companies, and investor anger over declining portfolios helped push through reforms intended to curb corporate shenanigans. But the appetite for reforms may be on the wane.

"Investors don't talk about the things that make them unhappy when their stocks are going up," said Gary Lutin, an investment banker and shareholder rights advocate. "There have been so many other revelations of cheating and chiseling that the public pressure to do something about stock options may have subsided."

Heading into the 2004 elections, the technology industry is poised for an intense lobbying effort in defense of options and against expensing. Already, technology leaders have begun a coordinated effort, bending the ears of politicians who come through Silicon Valley and organizing letter-writing campaigns by technology workers to elected officials.

"This thing will heat up and turn into an election-year issue," said Lynn Turner, head of research at proxy advisory firm Glass Lewis. As the former chief accountant at the Securities and Exchange Commission, Turner is no stranger to political fights over seemingly arcane accounting. "I fear this thing is going to turn into a bloody issue and turn nasty."

The stage is already set for a fight.

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