July 7, 2004

More Rumors on Shareholder Access

On May 11 and May 13, Broc blogged about rumors in the mainstream media about where the SEC was heading with its shareholder access proposal. The rumor mill is still working.

On July 1, a New York Times article by Stephen Labaton reported that Chairman Donaldson said that he has been unable to forge an agreement among his deeply divided colleagues. “Right now there is no consensus,” he said. “I’m not sure I agree with what anyone else thinks or anyone agrees with what I think.” The Times article reported that the deadlock “all but dooms” the possibility that new rules would be implemented prior to the next proxy season.

The Chairman’s June 20 speech at the Directors College at Standford lends credence to this report, where the Chairman stated that he remains “committed to responsible and constructive change in this area, and will proceed thoughtfully and carefully. [The SEC’s] goal is the right course, rather than a hasty, less thoughtful course. We will not be forced to act in the face of an artificial deadline.”

Buffett Sounds Off on Options Expensing Bill

In an Op-Ed piece in yesterday’s Washington Post, Berkshire Hathaway CEO Warren Buffett warned that the prize for “mathematical lunacy by a legislative body” may be awarded to the U.S. House of Representatives if it passes the Stock Option Accounting Reform Act of 2003 (H.R. 3574). (The current prize for “mathematical lunacy” is apparently held by the Indiana House of Representatives for declaring, in 1897, that pi would equal 3.2 instead of 3.14159).

The Stock Option Accounting Reform bill, which passed the House Financial Services Committee on June 15, mandates that stock options be counted as an expense on company balance sheets when they are issued to the CEO and the other four highest paid company officers, but not counted as an expense when they are issued to other employees. The bill also says that when a company is calculating the expense of the options issued to the top five, it shall assume that stock prices do not fluctuate. The bill would exempt small business issuers.

Buffett urged the House members to kill the bill.

– Posted by Julie Hoffman