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IT giants fight against rules on exec share options

A group of high-tech firms are pledging to disclose more information about their employee stock options in an effort to fend off new standards that would require them to expense the options against profits.

Thirty-three companies, including Intel, Cisco Systems and Sun Microsystems, said that they will voluntarily provide shareholders and the public with information about employee stock options on a quarterly basis.

The move is part of an initiative begun by industry lobbyists TechNet and the American Electronics Association (AeA) to sidestep the recommendations from of accounting groups that companies expense stock options to provide more transparency to investors.

Last week, the London-based International Accounting Standards Board (IASB) put forward a proposal recommending accounting changes that would require companies to expense options.

The IASB's US counterpart, the Financial Accounting Standards Board (FASB), is expected to make a similar move. The FASB establishes standards of financial accounting and reporting that are recognised by the US Securities and Exchange Commission and the American Institution of Certified Public Accountants.

An FASB spokeswoman said that the group would post proposed changes to rules affecting stock-based compensation on the group's Web site and will be inviting the public to comment. After the comment period, FASB will make a final recommendation.

However, some experts speculate that tech companies' efforts to fend off the option-expensing call is futile, saying that the decision has already been made.

The US Federal Reserve chairman Alan Greenspan has said that stock options among business managers have created perverse incentives to inflate stock prices artificially.

Stock options give employees the option to buy company stock at a price set on the date granted. If the stock rises, the employee profits. When employees have so much at stake in the company's share price, some argue that the employees may play up how well the company is doing to keep the share price high.

The tech companies worry, however, that expensing options will take a significant bite out of profits, leading firms to cut back on dispensing them. This prospect is particularly threatening to the technology community, which has taken the idea of stock-for-compensation to new heights. High-tech startups in particular have a reputation for doling out stock options to make up for no-frills salaries when the money is tight.

Some startups fear that expensing options will make it more difficult to get venture capital.

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