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April 03, 2002
Lieberman Offers Stock-Option Reforms
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He called for creating tax incentives toward that end in a speech Monday at New York University.
Lieberman, who chairs the Senate's lead panel in investigating the Enron scandal, the Governmental Affairs Committee, had been asked to speak on the future of corporate responsibility in the wake of the energy giant's collapse, according to the Dow Jones News Service.
In the case of Enron, Sen. Lieberman pointed out, equity-related compensation like options had tempted its management to boost the share price in the short term by making wide use of opaque partnerships, giving them the chance to cash out their stakes. The practice ran directly counter to the motivating aim of options because it had harmed the long-term interests of the company and its shareholders.
By comparison, employees at lower levels lost chunks of their 401(k) retirement funds, which were invested in Enron shares.
"We have broad support in Congress in terms of preventing options from being misused" by company management, Lieberman told Dow Jones Newswires after his speech. He added that he has started working towards generating more support for his tax-incentive proposal.
He noted that currently, the majority of stock options issued by corporate America goes to top managers. With the proposed tax incentives, at least 50 percent of the issuance should go to employees, he said.
Meantime, he said other tax benefits should also be developed to encourage managers and employees to hold their options longer. Lieberman also called for the government to strike a balance between "doing too little" and "doing too much" in the wake of Enron's debacle.
"The Enron earthquake cries out for government action," the self-described "pro-business Democrat" said, but the government should also make sure that it "doesn't stifle the spirits of enterprise" with too many regulations.
To view the Dow Jones article, click here.
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