Corporate Lobbying Behaviour on Accounting for Stock-Based Compensation: Venue and Format Choices

13 Pages Posted: 27 Apr 2002

See all articles by Nancy Thorley Hill

Nancy Thorley Hill

DePaul University - School of Accountancy and Management Information Systems (MIS)

Sandra Waller Shelton

DePaul University, College of Commerce-School of Accountancy

Kevin T. Stevens

DePaul University, College of Commerce-Department of Accountancy

Abstract

This article investigates U.S. corporate lobbying of the Financial Accounting Standards Board (FASB) in the U.S. on the exposure draft to Financial Accounting Standard No. 123 (FAS 123), 'Accounting for Stock-Based Compensation'. Essentially, firms lobbied the FASB in one of three ways: (a) against disclosure/recognition of any additional information beyond that already required in U.S. proxy statements, (b) for summary footnote disclosure of all employee stock-based compensation (SBC), or (c) for either pro forma or formal income statement recognition of all employee SBC. Accounting for Stock-Based Compensation

This study finds that the higher the level of the SBC of the top five executives, the less likely firms are to favour disclosing that information. This finding supports the hypothesis that economic self-interests motivated lobbying behaviour on FAS 123. Furthermore, the study finds that U.S. corporations lobby against disclosure of executive SBC in the annual reports even when the annual reports would disclose no additional information beyond that currently disclosed in proxy statements. This is evidence that managers perceive that the venue of disclosure (proxy versus annual report) matters. It is posited that managers lobbied against disclosure of SBC to avoid possible changes to compensation contracts which in turn could adversely affect stock prices. In sum, the results support the notion that managerial self-interest affects lobbying behaviour on the venue as well as the format of disclosure.

Keywords: accounting, compensation, lobbying, stock

JEL Classification: M41, M44, J33

Suggested Citation

Hill, Nancy Thorley and Waller Shelton, Sandra and Stevens, Kevin T., Corporate Lobbying Behaviour on Accounting for Stock-Based Compensation: Venue and Format Choices. Abacus, Vol. 38, No. 1, pp. 78-90, 2002. Available at SSRN: https://ssrn.com/abstract=308765

Nancy Thorley Hill (Contact Author)

DePaul University - School of Accountancy and Management Information Systems (MIS) ( email )

Chicago, IL 60604
United States

Sandra Waller Shelton

DePaul University, College of Commerce-School of Accountancy ( email )

Chicago, IL 60604
United States
312-326-8098 (Phone)
312-362-6208 (Fax)

Kevin T. Stevens

DePaul University, College of Commerce-Department of Accountancy ( email )

Chicago, IL 60604
United States

HOME PAGE: http://condor.depaul.edu/~kstevens

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