Tighter Rules for Options Fall Victim to Lobbying
For all the talk of corporate scandal, one leading proposal for change — tightening the rules on stock options — was brushed aside in Congress this week, thanks in part to a powerful business lobbying coalition that has long fought to protect these rich pay packages.

Long before the current wave of scandals, business interests have successfully protected stock options from attack in Congress. But last September, an umbrella group calling itself the Stock Option Coalition was formed from high-technology companies, executives of Fortune 500 companies, venture capitalists, biotechnology companies and the Nasdaq market — all sending out platoons of lobbyists, conducting sophisticated e-mail campaigns and reminding Congress of their hefty campaign contributions.

"We have made it clear to Congress that they should do nothing to restrict stock options," said Richard White, a former Republican lawmaker and chief executive of TechNet, a bipartisan lobbying group representing 235 high-technology and biotechnology companies. `'It's been a full-fledged effort for us."

So far, the group has been successful in deflecting popular sentiment and the weight of some powerful financial figures, among them the Federal Reserve chairman, Alan Greenspan, and Warren E. Buffett, the billionaire investor.

In Congressional testimony this week, Mr. Greenspan singled out stock options as one of the "avenues to express greed." He has also said that stock options should be considered a business expense and deducted from corporate revenue.

For the moment, the legislation before Congress to overhaul securities and accounting laws makes no mention of stock options. To those who believe that stock options tempt executives to bend the rules for personal gain, this is a gaping oversight. To members of the lobbying coalition, who believe that the widespread use of stock options enhances entrepreneurship and advances economic growth, it is a victory.

It is also a victory that drives others to distraction. Last Sunday, while being interviewed on "Meet the Press," Senator John McCain, the Arizona Republican who has long advocated limiting stock options, complained loudly that "it's a bipartisan fix that's in."

He continued, saying, "The swarm of lobbyists that came onto Capitol Hill said this is their highest priority, this is going to destroy Western civilization as we know it."

Senator McCain was not far off the mark in describing the intensity of the lobbying campaign. Leading the parade were two prominent venture capitalists, John Doerr and Floyd Kvamme, two Silicon Valley legends. Joining them were Alan Patricof, a well-known New York venture capitalist, and executives and lobbyists from Cisco Systems, Intel, Dell Computer, AOL Time Warner and Sun Microsystems. In addition, 126 biotechnology chief executives wrote an open letter to Congress on this issue.

Using the high-technology skills that made these companies famous, an employee can simply put his or her e-mail address on the TechNet Web site and a "Dear Lawmaker" letter will automatically be sent to Congress in less than a minute. "If my company does well, I hope one day to use my stock options to buy a home or put my children through college," reads the form letter.

Mark Hesen, president of the National Venture Capital Association in Washington, said: "We have 14,000 emerging growth companies in our database. We've got venture capitalists all over the country who have been active."

To add extra firepower, the group recruited the Business Roundtable, which represents the chief executives of the nation's largest companies, along with Nasdaq — the stock market of choice for most high-technology companies — as well as lobbying groups representing corporate financial officers.

For them, hundreds of millions of dollars are at stake — including millions in the personal net worth of many high-technology executives. For many start-up companies, stock options are a popular way of providing employee compensation — not only for executives, but for rank-and-file workers as well. With cash flow tight at many emerging companies, stock options — and the lure of riches yet to come — are a way to attract top talent.

"For a lot of these chief executives, we are talking about their personal pay," said an aide to a senator who supports the restrictions. `'You can be talking about $100 million in stock options for some of these guys. That makes them willing to direct lobbyists to protect their own personal pay."
http://www.nytimes.com/2002/07/20/business/20LOBB.html