NEW YORK, April 7 /PRNewswire/ -- A survey of institutional investors indicates that a vast majority back the proposal issued recently by the Financial Accounting Standards Board (FASB) that would require all public companies to list stock options as an expense in the income statement.
By a four to one margin, the 302 buy side portfolio managers and research professionals surveyed by Broadgate Consultants, Inc., said they believe the FASB proposal will improve transparency in financial reporting, and more than 70% said they thought the rule would improve corporate governance.
More than three quarters (77%) of respondents said the FASB proposal should be not be modified. Almost 85% of respondents said they were interested in the options expensing issue because GAAP accounting is an important consideration in their decision to invest.
"For many years options have been silently devaluing shareholder equity. Now, the FASB is saying 'Stop' and institutional investors are agreeing," said Thomas C. Franco, Chairman and Chief Executive Officer of Broadgate Consultants. "This survey essentially validates the market's view that financial statements should reflect a true and accurate picture of what is occurring in a company's performance."
An overwhelming majority -- 90% -- of respondents said they are opposed to any exemptions from the options expensing rule for "start-ups" or technology companies. Only 6% of respondents said they favor such exemptions.
In addition, more than 80% of respondents do not believe that the options expensing requirement will impair a company's ability to attract top management talent, harm their profitability or impede their ability to attract capital.
A majority of respondents -- 58% -- said they are satisfied with the way the FASB went about writing the proposed rule and believe FASB carefully weighed all points of view before reaching a decision.
On a related issue of whether U.S. public companies should conform to international accounting standards (which also require options expensing), respondents are of two minds: Just about half favor conformance, while 30% are opposed, and 21% are not sure.
When it comes to details of how the new rule should be applied, respondents showed more divergence of opinions:
* Respondents were split as to whether expensing stock options would complicate comparisons of historical financial performance of public companies. Just over half disagreed that it would complicate comparisons, while 39% agreed and 10% were not sure. * Survey respondents were also divided on what method companies should use if companies do expense options. One-third of portfolio managers were not sure what method should be used, while another third believe the FASB recommended Binomial Lattice should be used, and 18% believe Black-Scholes, or some variation, should be used. * Nearly 60% of respondents said they do not think that companies should abandon stock option plans altogether, in favor of other alternative forms of compensation, such as "stock appreciation rights." About Broadgate Consultants, Inc.
Established in 1987, Broadgate Consultants, Inc. provides strategic corporate and capital markets communications advisory and implementation services to public companies and private equity firms and their portfolio companies. Its clients include global public companies, including many with ADRs listed in the U.S., as well as private equity firms with assets under management ranging from $100 million to more than $5 billion. The firm is also recognized for its crisis management services. Broadgate is a member of Public Relations Organisation International (PROI), the world's oldest international partnership of independent public relations and marketing firms. More information about Broadgate can be found on the Internet at http://www.broadgate.com/.
CONTACT: Alan Oshiki of Broadgate Consultants, Inc., +1-212-232-2222
Web site: http://www.broadgate.com/