Dell Computer Corp will pay executives with more cash, and Intel is studying whether to give stock grants, after both were criticized for awarding options for more than 500 million shares in the second half of the 1990s.
Intel, the world's biggest computer-chip maker, said in a US Securities and Exchange Commission filing that it may raise the amount of performance-based cash it pays to workers and replace options with stock grants.
Dell, which boosted executive bonuses, will halve the number of stock options issued this year, chief financial officer James Schneider said in an interview.
Companies are reevaluating their use of stock options as accounting regulators consider requiring firms to deduct the estimated cost of stock options from earnings. Investors have criticized the role of options in inflating results. The earnings Intel and Dell reported during the past year would have been more than 30 percent lower had options been expensed.
"Clients are already pulling back on options," said Matt Turner, a compensation consultant with Mercer Human Resources Consulting LLC in Seattle. "We are doing a pretty brisk business this year."
He declined to disclose his clients.
Software maker Computer Associates International Inc and Internet retailer Amazon.com Inc have already begun to expense options, joining AT&T Corp, Ford Motor Co and at least 130 other US companies that have switched since the start of last year.
Investors such as Warren Buffett and policy makers including Federal Reserve Chairman Alan Greenspan call options a hidden expense that distorts financial statements.
Siebel Systems Inc investors rejected a proposal yesterday urging the business software maker to record employee stock options as a cost.
They also voted down a second shareholder proposal requesting that certain performance measures be met before workers could exercise their stock options.
Intel and Dell still are fighting mandatory expensing, even as they consider alternatives. Both belong to the International Employee Stock Options Coalition, a lobbying group supporting bills to delay listing options as an expense.
Intel chairman Andy Grove and chief executive Craig Barrett have written editorials opposing the proposal.
Intel chief financial officer Andy Bryant told a US Senate roundtable last month that requiring companies to expense options is akin to "asking me to commit perjury."
CFOs would be asked to certify financial results distorted by inaccurate estimates of option costs, he said.
Vanguard Group founder John Bogle has ridiculed that argument. Last June, he said "a lot of accounting is based on estimates" such as calculating depreciation on equipment or valuing a contract to deliver products in the future.
Shares of Santa Clara, California-based Intel rose US$0.25 to US$22.14 at 4pm New York time in NASDAQ Stock Market trading.
Round Rock, Texas-based Dell rose US$0.31 to US$31.94.
The companies opposing the change are unlikely to prevail, lawmakers and analysts said.
In 1994, accounting standards rulemakers voted that options should be treated as an expense. Congress convinced the group to back down after lobbying by computer-related companies. This time, the chairmen of the two congressional committees with jurisdiction over the issue don't plan to hold hearings, leaving the decision to the accounting group.
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