Gretchen Morgenson, the Pulitzer Prize-winning business writer for the New York Times, gave an award to one of Nevada’s senators in her year-end roundup, which she calls the Augustus Melmotte memorial prizes (named for a nasty con man in the novel The Way We Live Now).
“THE SILLIEST BILL AWARD To Senator Michael B. Enzi, Republican of Wyoming, and Senator Harry Reid, Democrat of Nevada, who introduced legislation to thwart those who would reform the way stock options are treated in financial statements.
“After years of letting companies get away with the pretense that stock options have no value, accounting rule makers this year will make companies deduct them from their books, as they would any expense. But the Enzi-Reid bill would overrule the rule makers and require companies to deduct only the cost of options granted to the top five executives of a company, not the options handed out to lower-level workers.
“Rejecting economic reality, as it so often does, the House of Representatives passed the legislation.”
Reid responded, “This legislation is just the right balance. Stock options help attract the best and brightest, and while some accounting reform is necessary, we don’t want to hinder small businesses and start-ups. This legislation helps protect a form of compensation that American workers rely on and that promotes productivity in the workforce. Stock options also help American companies remain competitive globally in important high-tech industries.”
Reid aide Shannon Eagan added, “The reason Sen. Reid got involved with this was to help all of the start-ups, Internet companies and small businesses in the Reno area and to specifically help Nevada’s economy. They came to him asking for help, and he saw it as important to protect small businesses and start-up companies from cumbersome bureaucratic red tape.”
The Enzi/Reid bill failed to make it all the way through Congress, and on Dec. 16, the Financial Accounting Standards Board went ahead with the rule requiring companies to deduct the cost of worker stock options from profits.