U.S. SEC pick Cox would implement options rule
By Kevin Drawbaugh
WASHINGTON (Reuters) – A controversial new accounting rule
requiring companies to treat stock options as a business
expense got strong support on Tuesday from Rep. Christopher
Cox, the White House choice to become chairman of the U.S.
Securities and Exchange Commission.
The California Republican told a Senate committee that if
confirmed as SEC chairman he would put the rule into practice,
answering doubts about the future of expensing if he takes the
“I will ensure that the Securities and Exchange Commission
builds upon the record as already established and that the rule
is implemented as the markets expect,” he said at his Senate
Banking Committee confirmation hearing.
Ever since President Bush nominated Cox last month, critics
have asked whether he would seek to delay or otherwise block
the option expensing rule adopted by the Financial Accounting
Standards Board (FASB) in December.
Cox co-sponsored a bill last year that tried to limit the
FASB expensing rule to the top five officers of a company and
delay its implementation. The measure passed the U.S. House of
Representatives but was not taken up by the Senate.
Asked at the hearing by lawmakers about the role of the
SEC, FASB and option expensing, Cox said, “In my view, the
independence of the FASB is of vital importance, as is the
independence of the Securities and Exchange Commission.”
The FASB, which writes America’s Generally Accepted
Accounting Principles (GAAP), required stock options to be
counted as a business expense, like salaries or bonuses.
Stock options — rights to buy shares in the future at a
predetermined price — are key to the pay of many corporate
executives. Before the FASB ruling, companies could issue them
without directly counting them against profits.
The new GAAP rule on expensing was fiercely opposed by much
of the high-tech industry, which issues options liberally and
is a key presence in Cox’s home district outside Los Angeles.
Cox, 52, was nominated last month by the White House to
take over the investor protection agency from William
Donaldson, who quit on June 30 after two years on the job.
Cox also told his confirmation hearing that his “top
priority will be vigorous enforcement of our securities laws.”
He pledged “continuity, clarity and consistency in the
commission’s rule-making and enforcement responsibilities.”
A free-market conservative who has served in the House of
Representatives for almost 17 years, Cox has been strongly
endorsed by Republicans and securities industry groups. Some
Democrats and investor advocates have opposed his nomination
and expressed concern about his record and intentions.
The banking committee was considering the Cox nomination
along with those of two Democrats: incumbent SEC Commissioner
Roel Campos and SEC staff member Annette Nazareth.
Campos is a businessman and former government prosecutor
from Texas who has been on the SEC for three years. He is being
renominated for a term that would run to June 2010.
Nazareth has been director of the SEC Division of Market
Regulation since 1999. She is being nominated to fill out a
term that would expire in June 2007.
If approved by the Banking Committee, the nominations could
go to a vote by the full Senate later this week.