Employee Ownership Blog

The announcement by Untied Airlines that is might file for bankruptcy has prompted a number of media stories on whether the employee ownership plan at the company was part of the problem (see, for instance, the excellent article on this topic in the New York Times August 15).

A new study of employees working for publicly traded high-technology companies shows that 84% of employees receive stock options. Officers of the company get 34% of the value of the options granted.

Members of the Financial Services Forum, a group of large financial services companies, have announced they will all expense options.

The Financial Standards Accounting Board (FASB) has announced it will allow companies who voluntarily choose to expense options to use any of three approaches to starting the practice:

An effort by the American Institute of Certified Public Accountants (AICPA) to develop guidelines for valuing stock in pre-IPO companies was turned down by FASB, which must set GAAP standards. FASB members were concerned that the AICPA would not set standards that would prevent abuses.

Senator Joseph Lieberman (D-CT), along with Senator Barbara Boxer (D-CA) has introduced the "Rank and File Stock Options Act" (S. 2877). The bill has three main provisions:

John Boehner (R-OH) and Amo Houghton have introduced the "Workplace Stock Option Act of 2002" (H.R. 5242). The bill would allow employees to put aside regular tax-deductible payroll deferrals into a special trust over up to five years for the purpose of purchasing shares of their employer.

A new Congressional Research Service study of 277 large public companies has found that employer stock accounts for an average of 38% of all assets in defined contribution plans other than stand-alone ESOPs, with a median of 24.7%.

In Revenue Procedure 2002-50, the IRS provided an exemption from 1099-B reporting requirements for stock brokers handling the sale of shares acquired through options by employees, former employees, or other people providing a service to a company who engage in same-day sale transactions.

On July 16, the International Accounting Standards Board (IASB) approved recommendations from its staff that companies expense share-based compensation. The board vote was unanimous.

The Senate passed an accounting reform bill that makes major changes in accounting procedures but leaves stock options accounting rules untouched.

Meanwhile, Coca-Cola, Level 3 Communications, and the Washington Post Company have announced that they will expense options. Coca-Cola is taking an innovative approach to valuing the options, asking two investment banks to help determine a price.