Broad-Based Stock Option Plan Transparency Act - Directs the Securities and Exchange Commission (SEC) to require companies to include within certain mandatory reports details regarding stock option plans, stock purchase plans, and other arrangements involving employee acquisition of an equity interest in the company, including: (1) a discussion of the dilutive effect of stock option plans (written in accordance with the Plain English Handbook published by the Office of Investor Education and Assistance of the Commission); (2) expanded disclosure of the dilutive effect of employee stock options on the company's earnings per share number; (3) prominent placement and increased comparability of all stock option related information; and (4) a summary of stock options granted to the five most highly compensated executive officers, including outstanding stock options of those officers.
Directs the SEC to examine and report to specified congressional committees on the effectiveness of the enhanced disclosures required by this Act in increasing transparency to current and potential investors.
Prohibits the Commission, between enactment of this Act and submission of such report, from recognizing as generally accepted accounting principles any new accounting standards regarding the treatment of stock options.
Directs the Secretary of Commerce to analyze and report to specified congressional committees on broad-based employee stock option plans, particularly in the high technology and any other high growth industries.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 913 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 913
To direct the Securities and Exchange Commission to require enhanced
disclosures of employee stock options, and to require a study on the
economic impact of broad-based employee stock option plans, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 17, 2005
Mr. Dreier (for himself, Ms. Eshoo, Mr. Blunt, Mr. Crowley, Mr.
Shadegg, Mr. Wu, Mr. Cantor, Mr. Inslee, Mr. Royce, Mr. McIntyre, Mr.
Gary G. Miller of California, Ms. Zoe Lofgren of California, Mr.
Hefley, Mr. Lantos, Mrs. Blackburn, Mr. Miller of North Carolina, Mr.
Cox, Mr. Smith of Texas, Mr. Simpson, Mr. Rogers of Michigan, Mr.
Hayworth, Mr. Sensenbrenner, and Mr. Wilson of South Carolina)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To direct the Securities and Exchange Commission to require enhanced
disclosures of employee stock options, and 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''.
SEC. 2. CONGRESSIONAL FINDINGS.
Congress finds the following:
(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.
(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 enactment of this Act, the Securities and Exchange Commission
(hereafter referred to as the ``Commission'') shall, by rule, require,
for each company filing 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 more 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 company's earnings per share number;
(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.--The Commission shall examine the
effectiveness of the enhanced disclosures required in Section 3 in
increasing transparency to current and potential investors during the
3-year period following the issuance of a final rule pursuant to
section 3(a). Not later than 180 days after the end of such 3-year
period, the Commission shall transmit a report 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.--Beginning on the date of enactment of this Act and continuing
until the transmission of the report required under subsection (a), the
Commission shall not recognize as generally accepted accounting
principles any new accounting standards related to the treatment of
stock options.
SEC. 5. STUDY ON THE ECONOMIC IMPACT OF BROAD-BASED EMPLOYEE STOCK
OPTION PLANS AND REPORT TO CONGRESS.
(a) Study.--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. Such study
and analysis shall include an examination of the following issues:
(1) 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.
(2) The role of such plans in the recruitment and retention
of skilled workers.
(3) The role of such plans in stimulating research and
innovation.
(4) Their impact on the economic growth of the United
States.
(5) 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 shall submit a report and analysis of the study
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 House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
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