Broad-Based Stock Option Plan Transparency Act of 2003 - Directs the Securities and Exchange Commission (SEC) to require that certain mandatory periodic reports include detailed information regarding stock option plans, stock purchase
plans, and other arrangements involving an employee acquisition of an equity interest in the publicly traded company, particularly with respect to the dilutive effect of such plans.
Requires such reports to include: (1) a discussion, written in "plain English" of the dilutive effect of stock option plans, including tables or graphic illustrations; (2) expanded disclosure of the dilutive effect of employee stock options upon the earnings per share number of the company; (3) prominent placement and increased comparability of all stock options related information; and (4) a summary of the stock options granted to the five most highly compensated executive officers of the company, including any outstanding stock options of those officers.
Directs the SEC to study and report to Congress on the effectiveness of the enhanced disclosures in increasing transparency to investors.
Prohibits the SEC from recognizing as generally accepted accounting principles for purposes of enforcing the securities laws any accounting standards related to the treatment of stock options that it did not recognize for that purpose before April 1, 2003.
Instructs the Secretary of Commerce to report to Congress on a study and analysis of broad-based employee stock option plans, particularly in the high technology and any other high growth industries.
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 979 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 979
To direct the Securities and Exchange Commission to require enhanced
disclosures of employee stock options, to require a study on the
economic impact of broad-based employee stock option plans, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 1, 2003
Mr. Ensign (for himself, Mrs. Boxer, Ms. Cantwell, Mr. Crapo, Mr.
Craig, Mr. Allen, Mrs. Murray, Mrs. Feinstein, Mr. Reid, Mr. Allard,
Mr. Burns, Mr. Warner, Mr. Bennett, Mr. Smith, and Ms. Stabenow)
introduced the following bill; which was read twice and referred to the
Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To direct the Securities and Exchange Commission to require enhanced
disclosures of employee stock options, to require a study on the
economic impact of broad-based employee stock option plans, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Broad-Based Stock Option Plan
Transparency Act of 2003''.
SEC. 2. CONGRESSIONAL FINDINGS.
Congress finds that--
(1) innovation and entrepreneurship, particularly in the
high technology industry, helped propel the economic growth of
the 1990s, and will continue to be the essential building
blocks of economic growth in the 21st century;
(2) broad-based employee stock option plans enable
entrepreneurs and corporations to attract quality workers, to
incentivize worker innovation, and to stimulate productivity,
which in turn increase shareholder value;
(3) broad-based employee stock options plans that expand
corporate ownership to rank-and-file employees spur capital
formation, benefit workers, and improve corporate performance
to the benefit of investors and the economy;
(4) concerns raised about the impact of employee stock
option plans on shareholder value raise legitimate issues
relevant to the current level of disclosure and transparency of
those plans to current and potential investors; and
(5) investors deserve to have accurate, reliable, and
meaningful information about the existence of outstanding
employee stock options and their impact on the share value of a
going concern.
SEC. 3. IMPROVED EMPLOYEE STOCK OPTION TRANSPARENCY AND REPORTING
DISCLOSURES.
(a) Enhanced Disclosures Required.--Not later than 180 days after
the date of enactment of this Act, the Securities and Exchange
Commission (in this Act referred to as the ``Commission'') shall, by
rule, require, for each company required to file periodic reports under
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m, 78o(d)), that such reports include detailed information
regarding stock option plans, stock purchase plans, and other
arrangements involving an employee acquisition of an equity interest in
the company, particularly with respect to the dilutive effect of such
plans, including--
(1) a discussion, written in ``plain English'' (in
accordance with the Plain English Handbook published by the
Office of Investor Education and Assistance of the Commission),
of the dilutive effect of stock option plans, including tables
or graphic illustrations of such dilutive effects;
(2) expanded disclosure of the dilutive effect of employee
stock options on the earnings per share number of the company;
(3) prominent placement and increased comparability of all
stock option related information; and
(4) a summary of the stock options granted to the 5 most
highly compensated executive officers of the company, including
any outstanding stock options of those officers.
(b) Equity Interest.--As used in this section, the term ``equity
interest'' includes common stock, preferred stock, stock appreciation
rights, phantom stock, and any other security that replicates the
investment characteristics of such securities, and any right or option
to acquire any such security.
SEC. 4. EVALUATION OF EMPLOYEE STOCK OPTION PLANS TRANSPARENCY AND
REPORTING DISCLOSURES AND REPORT TO CONGRESS.
(a) Study and Report.--
(1) Study.--During the 3-year period following the date of
issuance of a final rule under section 3(a), the Commission
shall conduct a study of the effectiveness of the enhanced
disclosures required by section 3 in increasing transparency to
current and potential investors.
(2) Report.--Not later than 180 days after the end of the
3-year period referred to in paragraph (1), the Commission
shall transmit a report of the results of the study conducted
under paragraph (1) to the Committee on Financial Services of
the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
(b) Moratorium on New Accounting Standards Related to Stock
Options.--During the period beginning on the date of enactment of this
Act and ending 60 days after the date of transmission of the report
required under subsection (a)(2), the Commission shall not recognize as
generally accepted accounting principles for purposes of enforcing the
securities laws any accounting standards related to the treatment of
stock options that the Commission did not recognize for that purpose
before April 1, 2003.
SEC. 5. STUDY ON THE ECONOMIC IMPACT OF BROAD-BASED EMPLOYEE STOCK
OPTION PLANS AND REPORT TO CONGRESS.
(a) Study.--
(1) In general.--The Secretary of Commerce shall conduct a
study and analysis of broad-based employee stock option plans,
particularly in the high technology and any other high growth
industries.
(2) Content.--The study and analysis required by paragraph
(1) shall include an examination of--
(A) the impact of such plans on expanding employee
corporate ownership to workers at a wide-range of
income levels, with a particular focus on rank-and-file
employees;
(B) the role of such plans in the recruitment and
retention of skilled workers; and
(C) the role of such plans in stimulating research
and innovation;
(D) the impact of such plans on the economic growth
of the United States; and
(E) the role of such plans in strengthening the
international competitiveness of companies organized
under the laws of the United States.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Secretary of Commerce shall submit a report on the study
and analysis required by subsection (a) to--
(1) the Committee on Energy and Commerce and the Committee
on Financial Services of the House of Representatives; and
(2) the Committee on Commerce, Science, and Transportation
and the Committee on Banking, Housing, and Urban Affairs of the
Senate.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S5670-5671)
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. (text of measure as introduced: CR S5671)
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