Apple Shareholders Vote Against Management On Expensing Options

A quiet revolution took place at yesterdayis Apple shareholder meeting. AAPL shareholders voted for a shareholder initiative that would have Apple counting employee stock options as an expense.

Currently, companies are legally allowed to not expense options, something that helped contribute to the boom of the 1990s. Corporations large and small offered their employees compensation that was very heavy on the option side, allowing them to keep labor costs down (on paper), which helped raise profits. There has been a growing movement to change SEC regulations so that options would be counted as an expense. The goal is to make it so that corporations would be less able to manipulate their books through liberal stock option plans.

Yesterdayis vote is not binding, but is rather more of a recommendation to Appleis board of directors. According to the San Jose Mercury News, Appleis BoD was against the measure. The argument Apple used in its communication with shareholders is that until there is a level playing field in the form of specific SEC regulations, Apple reporting options as an expense could lower its competitiveness when its competitors were not doing so. From the San Jose Mercury News:

Apple Computer could become the first Silicon Valley technology company to treat employee stock options as an expense, with shareholders approving the accounting change today over the objections of the companyis board of directors.

The Apple board recommended against the proposal from the United Brotherhood of Carpenters and Joiners of America, saying it would hinder the companyis ability to attract and retain key employees and would produce less accurate financial statements because there is no standard way to calculate the cost.


Preliminary results indicate that investors approved the measure, said Nancy Heinen, the companyis secretary and general counsel. She said the company would disclose the formal vote tally in its next quarterly statement.

There is additional information in the San Jose Mercury News article, as well as coverage from CNet.