Updated from 5:31 p.m. EST

Hewlett-Packard ( HPQ) shareholders approved a proposal at the company's annual meeting Wednesday to expense stock options.

Shareholders cast 1.2 billion votes in favor of the measure and 921 million against.

The options expensing measure was put forth by the Massachusetts Laborers' Pension Fund, which owns 87,100 shares of H-P stock. The pension fund quoted comments in favor of expensing options from Warren Buffett and Alan Greenspan. Greenspan once said companies' reluctance to expense options has created a "significant distortion in reported earnings."

In 2003, H-P's net income of $2.5 billion would have been reduced $762 million to $1.8 billion if the company had expensed options using the fair-value method. Annual earnings would have been cut from 83 cents to 59 cents.

Critics complain that options grant programs drain corporate cash flows by forcing companies to buy back their own stock to offset dilution from options issuance.

H-P had opposed the move to expense options, invoking the standard line among opponents of expensing that options are difficult to value accurately.

The debate is to some extent symbolic, since the Financial Accounting Standards Board is expected to begin requiring companies to expense options on their income statements starting in 2005.