Bush Campaign Lies

Sunday, April 11, 2004

Kerry's Reversal On Stock Options Expensing 

This is the 23rd item in the GOP list of Kerry flip-flops. And it's true: Kerry's position in 1994 is the exact opposite of his position in 2003.

In 1994, the Financial Accounting Standards Board had put forth a suggestion that the SEC require all companies to amortize the cost of stock options. Kerry made a speech on the floor of the Senate in which he said:

"There is no more compelling testimony to the damage the FASB rule will do to these companies than the testimony of the venture capital community. After all, apart from company founders it is the venture capitalists who provide all or most of the ownership capital for emerging companies, so it is the venture capitalists who are giving away part of the store when they grant stock options. The venture capitalists tell me that the FASB rule will simply make stock options more expensive, which means they will be granted less often, which will make recruitment of talent more difficult, and which will make the cost of starting a company rise.

Now, this might be acceptable if some greater public purpose were served by the FASB rule, such as the provision of a clear benefit to the investing public. But as I noted previously, it is difficult to find such a benefit in the current FASB proposal." (emphasis mine)
The GOP then cite a 2003 Washington Post article which quotes Kerry as saying that 'all publicly traded companies should be required to expense [stock] options'.

The GOP is right; Kerry really did change his view on this subject. In 1994, Kerry didn't see a 'clear benefit to the investing public' in expensing stock options, and today he does. It's reasonable to conclude that Kerry legitimately changed his mind in the wake of the recent corporate scandals --- along with a great many other people.

What the Republicans don't want you to know is that Kerry's 1994 floor speech was made in support of Senate Amendment 1668, 'To express the sense of the Senate that the Financial Accounting Standards Board should maintain the current accounting treatment of employee stock options and employee stock purchase plans' --- that is, that stock options should not be expensed. This amendment eventually passed the Senate by an overwhelming vote of 88 to 9, with every single Republican senator voting for it.

So you decide. Did Kerry change his mind because he thought it would buy him more votes --- in which case, the same question must be asked of many Republican senators as well --- or because recent events made him realize that expensing stock options was a necessary reform? It's clear to me that the latter explanation is the correct one, so this reversal should not be held against Kerry as a 'flip-flop'.

3:45 PM