McCain Accounting Proposal Scuttled
Senate Rejects Listing Of Stock Options as A Corporate Expense
Washington Post Staff Writers
Friday, July 12, 2002; Page A01
Sen. John McCain (R-Ariz.) tried unsuccessfully to attach to a broader corporate accountability bill a requirement that companies subtract the cost of stock option grants from their reported profits. But the Democratic leadership prevented McCain’s amendment from reaching a vote.
“The fix is in,” said McCain, vowing to try to force a vote on the measure in the future. McCain’s proposal faced bipartisan resistance in the Senate.
Unlike salaries and cash bonuses, option grants to executives and employees are not counted as an expense on corporate statements. If they were, many companies would report weaker profits, and some companies that now appear profitable would post losses.
The ability of companies to dispense options as if they had no cost has led to huge executive grants, giving corporate leaders added incentive to cook the books and artificially inflate stock prices, some politicians and business analysts say.
After Republicans used parliamentary maneuvers to block Democrats’ amendments, Assistant Majority Leader Harry M. Reid (D-Nev.) outflanked McCain. As a result, Reid spared senators the potential discomfort of going on record with a vote against the stock option amendment.