May 8, 2003 1:34 PM PDT
Intel ups effort against option plan
According to an Intel filing made Thursday with the Securities and Exchange Commission, CEO Craig Barrett sent a memo to employees recently, urging them to vote down the proposal and saying that if it passes, it will be harder for Intel to issue stock options to workers. Two weeks ago, Barrett penned an opinion piece in The Wall Street Journal, outlining the benefits of maintaining the current accounting practice and the pitfalls of a change.
Meanwhile, on Wednesday, Intel Chairman Andy Grove sent a letter to investors, asking for their support in defeating the shareholder proposal. Grove has long been a vocal opponent of the efforts by federal agencies to require companies to expense options as part of their income statement.
"We believe this is a deeply flawed method of accounting that will diminish the accuracy and clarity of our financial reporting and could cause real economic harm to Intel, our stockholders, and our economy," Grove said in his letter. "This is a serious issue that should not be made trivial."
Intel's efforts come at a time when a number of tech companies have had mixed results fighting off such shareholder initiatives. Hewlett-Packard and IBM narrowly defeated similar shareholder proposals this year, but Apple Computer shareholders approved expensing employee stock options, despite the company's recommendations against such a move.
Intel's shareholders will cast votes on the proposal during the company's annual meeting May 21. The proposal, submitted by the United Brotherhood of Carpenters and Joiners of America Pension Fund, says that expensing employee stock options in the income statement would present a more accurate picture of a company's operational earnings. Under current accounting rules, companies can either expense employee stock options as part of the income statement, or list them as a footnote in quarterly filings with the SEC.
Intel, in its quarterly filing with the SEC on Wednesday, noted that its first-quarter earnings would have been cut by roughly 30 percent had it accounted for employee stock options as part of its income statement.
Some companies are in favor of expensing employee stock options, including Amazon.com, Computer Associates and about 30 others.