PeopleSoft narrowly avoided having most of its earnings from last year wiped out after fending off a shareholder challenge to make expensing stock options company policy.
A shareholder proposal demanded that PeopleSoft account for the options it grants employees as an expense in its financial filings. If this happened, PeopleSoft's profits would have shrunk in 2002 from $182.6 million to just $4.3 million.
In a letter to stockholders before the vote, Chief Executive Craig Conway wrote that options should not be accounted for as an expense because they "have no economic impact on a company." In the event some 53 per cent of PeopleSoft shareholders voted against the measure and 47 per cent voting for it.
Since Enron and Worldcom, US companies are coming under increased pressure to account for stock options as an expense because of concerns about CEO compensation and corporate scandals in which executives raked in big stock-option payoffs. Proposals to address have been introduced by investors meeting at over 100 companies this year alone.
The US Financial Accounting Standards Board is expected to enforce changes and should have new rules in place by 2004.