Tech Lobby Sounds Call to Arms in Options Fight

The war over expensing stock options is heating up.

Lobbyists for big technology companies are planning a blitz in Washington, D.C., on Tuesday to support a bill that would limit expensing of options. The bill would require companies to expense only those options granted to the top five executives of a given company.

About 30 anti-expensing executives will meet with some 25 senators who are undeclared on the issue, said John Palafoutas, chief lobbyist for the AeA, which represents the high-tech industry. They'll also be meeting with three members of the Securities and Exchange Commission and a representative for William Donaldson, its chairman. Donaldson has been an outspoken proponent of options expensing, urging the Senate last month to oppose the options bill.

Last week, a separate faction of tech companies presented accounting regulators with an alternative formula for calculating options expenses. The result would be dramatically lower reported costs for most companies that use options to compensate employees and executives.

The latest moves come as the Financial Accounting Standards Board, the nation's chief regulator on options, prepares a final rule that would require all public companies to recognize their full costs on income statements each quarter. FASB expects to release the rule by the end of the year.

These moves come amid a national election that could alter the battlefield. "You are looking at some potentially disruptive changes next year," said James Lucier, senior Washington analyst for Prudential Securities. "Things could look very different after the election."

The debate centers on whether companies should have to include options costs in their income statements. Current rules allow companies to effectively ignore such costs and merely include them as a footnote in their financial reports. But FASB's rule would make reporting those costs mandatory.