IASB share plans ‘off-target’

Link: Stock option rule will cost UK plc £5bn

However, despite an insistence that it is listening to suggestions, there remains little chance of the standard-setter changing its mind.

The IASB is looking to expense share options to the company’s balance sheet as a way of recognising the true level of remuneration to top executives and curbing what is in essence payments that the company does not need to account for.

There are, however, concerns that the new standards will hit the wrong employees in the pocket.

Diane Hay, Proshare chief executive, said: ‘We think the response of the IASB is that of a sledgehammer cracking a nut. The needs of users could be satisfied by greater disclosure and the irrational exhuberances of top executive options would be better tackled through corporate governance.’

Hay wants all stock options to remain off the balance sheet but admitted: ‘Proshare carries no torch for top executives.’

It is focused on achieving the removal of general employee schemes from the IASB’s plans. Research it conducted in smaller quoted and unquoted companies showed that two-fifths of those questioned would stop granting options to their all-employee schemes if expensing was introduced.

Proshare’s case has also been backed by the TUC. Janet Williamson, policy officer at the TUC, said: ‘We do not see money from share schemes as another form of pay. In fact we would always argue strongly that share schemes should be in addition to, and not a substitute for, adequate salaries and pay.

‘To treat share schemes as a form of pay would be to put far too much risk and uncertainty into employees’ pay cheques.’

The IASB, however, feels that there is no compelling case to distinguish in the accounts between all-employee share schemes and those options offered to top executives.

Bob Garnett, board member at the IASB, said: ‘The strongest argument for exempting all-employee schemes has come from Proshare, but it is still not strong enough to change my mind. If anyone does have a compelling argument for this, we are still prepared to listen.’

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