Lieberman and Accounting for Options

Michael Froomkin reminds us of yet another moment when Joe Lieberman was the bad guy:

Discourse.net: Lieberman + Bad Accounting = BFF: [M]ore than anybody else in America, Joe Lieberman is responsible for some of the worst corporate abuses during the recent tech bubble and for the current growing options backdating scandal. The Connecticut media has noted this, but not the national media, and it is real important.... [I]n 1993 Lieberman saved amazingly bad accounting for when a company pays an executive with stock options instead of cash. This caused options to flourish. Options make an executive more concerned with short-term fluctuations in her company's stock price than in running the company well....

In 1993, the Financial Accounting Standards Board (FASB) was set to fix the accounting rules for compensatory stock options.... Cash compensation is an expense. Giving an executive a piece of the company for nothing dilutes the value of the stock for the other shareholders every bit as much as paying cash, but no expense was booked. There were a few weak technical arguments in favor of the old rule.... FASB rejected these arguments. Along comes Joe Lieberman! Reflecting the cost of options on financial statements will hurt high-tech companies.... Lieberman pushes through a Sense of the Senate resolution that Congress would disband FASB if they require expensing of stock options. FASB caved. PBS has a nice discussion of all this online at Lieberman v. FASB

Just this year, FASB began requiring expensing of stock options. The Republic did not fall. FASB was able to hide behind residual post-Enron public distrust of corporate executives and Europe adopting options expensing to finally get things right 13 years later.

One can wonder how much better American business would have been run for the last 13 years were it not for Joe Lieberman.