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OPTION BACKDATING GRANDSTANDING HEARINGS TODAY

September 06, 2006

The Senate Finance Committee has its hearing on stock option backdating today. This will give Congress a chance to draft baroque and incomprehensible legislation to crack down on activities that are already illegal, while displaying mock outrage at accounting violations ("How dare you cook the books? That's our job!")

Yet some good comes out of the process: an excellent TaxProf Blog post full of links to scholarly and not-so-scholarly discussion of tax and legal issues around the backdating scandal. You can read my jaded take on the hearings here.

UPDATE: The Wall Street Journal ($link) says today that Congress may consider eliminating the stock option exception to the $1 million limitation on executive pay - even though the exception aready doesn't apply to backdated options.

In an interview, Sen. Grassley, whose committee opens hearings on options and executive compensation today , said doing away with the deduction for performance-based pay entirely is a "possibility," as is "at least tightening it up." Though he said he couldn't give a precise head count of support in Congress, he said "a lot of members are interested" in possibly scaling back executive-pay deductions.

Far better to just eliminate the $1 million cap. I guess it's too dangerous to allow consenting adults to engage in compensation without micromanagement from the 535 economic geniuses in Congress.

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