I 

108TH CONGRESS 

1ST SESSION H. R. 1372

To direct the Securities and Exchange Commission to require enhanced disclosures of employee stock options, and to require a study on the economic 

impact of broad-based employee stock option plans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 20, 2003

Mr. DREIER (for himself, Ms. ESHOO, Mr. OSE, Mr. SMITH of Washington, 

Mr. UPTON, Mr. HONDA, Mr. COX, Mr. DOOLEY of California, Mr. SESSIONS, Mr. MCINTYRE, Mr. TOM DAVIS of Virginia, Ms. LOFGREN, Mr. 

SMITH of Texas, Mr. THOMPSON of California, Mr. HOUGHTON, Ms. 

HARMAN, Mr. OTTER, and Mr. GOODLATTE) introduced the following bill; 

which was referred to the Committee on Financial Services 

A BILL

To direct the Securities and Exchange Commission to require 

enhanced disclosures of employee stock options, and to 

require a study on the economic impact of broad-based 

employee stock option plans, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Broad-Based Stock 

5 Option Plan Transparency Act of 2003.’’
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1 SEC. 2. CONGRESSIONAL FINDINGS. 

2 Congress finds the following: 

3 (1) Innovation and entrepreneurship, particu4 larly in the high technology industry, helped propel 

5 the economic growth of the 1990s, and will continue 

6 to be the essential building blocks of economic 

7 growth in the 21st century. 

8 (2) Broad-based employee stock option plans 

9 enable entrepreneurs and corporations to attract 

10 quality workers, to incentivize worker innovation, 

11 and to stimulate productivity, which in turn increase 

12 shareholder value. 

13 (3) Broad-based employee stock options plans 

14 that expand corporate ownership to rank-and-file 

15 employees spur capital formation, benefit workers, 

16 and improve corporate performance to the benefit of 

17 investors and the economy. 

18 (4) Concerns raised about the impact of em19 ployee stock option plans on shareholder value raise 

20 legitimate issues relevant to the current level of dis21 closure and transparency of those plans to current 

22 and potential investors. 

23 (5) Investors deserve to have accurate, reliable, 

24 and meaningful information about the existence of 

25 outstanding employee stock options and their impact 

26 on the share value of a going concern. 
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1 SEC. 3. IMPROVED EMPLOYEE STOCK OPTION TRANS2 PARENCY AND REPORTING DISCLOSURES. 

3 (a) ENHANCED DISCLOSURES REQUIRED.— Not 

4 later than 180 days after the enactment of this Act, the 

5 Securities and Exchange Commission (hereafter referred 

6 to as the ‘‘Commission’’) shall, by rule, require, for each 

7 company filing periodic reports under section 13(a) or 

8 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 

9 78m, 78o(d)), that such reports include more detailed in10 formation regarding stock option plans, stock purchase 

11 plans, and other arrangements involving an employee ac12 quisition of an equity interest in the company, particularly 

13 with respect to the dilutive effect of such plans, includ14 ing—

15 (1) a discussion, written in ‘‘plain English’’ (in 

16 accordance with the Plain English Handbook pub17 lished by the Office of Investor Education and As18 sistance of the Commission), of the dilutive effect of 

19 stock option plans, including tables or graphic illus20 trations of such dilutive effects; 

21 (2) expanded disclosure of the dilutive effect of 

22 employee stock options on the company’s earnings 

23 per share number; 

24 (3) prominent placement and increased com25 parability of all stock option related information; 

26 and 
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1 (4) a summary of the stock options granted to 

2 the 5 most highly compensated executive officers of 

3 the company, including any outstanding stock op4 tions of those officers. 

5 (b) EQUITY INTEREST.—As used in this section, the 

6 term ‘‘equity interest’’ includes common stock, preferred 

7 stock, stock appreciation rights, phantom stock, and any 

8 other security that replicates the investment characteris9 tics of such securities, and any right or option to acquire 

10 any such security. 

11 SEC. 4. EVALUATION OF EMPLOYEE STOCK OPTION PLANS 

12 TRANSPARENCY AND REPORTING DISCLO13 SURES AND REPORT TO CONGRESS. 

14 (a) STUDY AND REPORT.—The Commission shall ex15 amine the effectiveness of the enhanced disclosures re16 quired in Section 3 in increasing transparency to current 

17 and potential investors during the 3-year period following 

18 the issuance of a final rule pursuant to section 3(a). Not 

19 later than 180 days after the end of such 3-year period, 

20 the Commission shall transmit a report to the Committee 

21 on Financial Services of the House of Representatives and 

22 the Committee on Banking, Housing, and Urban Affairs 

23 of the Senate. 

24 (b) MORATORIUM ON NEW ACCOUNTING STANDARDS

25 RELATED TO STOCK OPTIONS.—Beginning on the date of 
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1 enactment of this Act and continuing until the trans2 mission of the report required under subsection (a), the 

3 Commission shall not recognize as generally accepted ac4 counting principles any new accounting standards related 

5 to the treatment of stock options. 

6 SEC. 5. STUDY ON THE ECONOMIC IMPACT OF BROAD7 BASED EMPLOYEE STOCK OPTION PLANS 

8 AND REPORT TO CONGRESS. 

9 (a) STUDY.—The Secretary of Commerce shall con10 duct a study and analysis of broad-based employee stock 

11 option plans, particularly in the high technology and any 

12 other high growth industries. Such study and analysis 

13 shall include an examination of the following issues: 

14 (1) The impact of such plans on expanding em15 ployee corporate ownership to workers at a wide16 range of income levels, with a particular focus on 

17 rank-and-file employees. 

18 (2) The role of such plans in the recruitment 

19 and retention of skilled workers. 

20 (3) The role of such plans in stimulating re21 search and innovation. 

22 (4) Their impact on the economic growth of the 

23 United States. 
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1 (5) The role of such plans in strengthening the 

2 international competitiveness of companies organized 

3 under the laws of the United States. 

4 (b) REPORT.—Not later than 1 year after the date 

5 of enactment of this Act, the Secretary shall submit a re6 port and analysis of the study required by subsection (a) 

7 to—

8 (1) the Committee on Energy and Commerce 

9 and the Committee on Financial Services of the 

10 House of Representatives; and 

11 (2) the Committee on Commerce, Science, and 

12 Transportation and the Committee on Banking, 

13 Housing, and Urban Affairs of the Senate.

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