IBM Shareholders Say OK to Options Expensing

April 27, 2004 ( - IBM shareholders have thrown their backing behind a non-binding proposal that urges the computer giant to treat stock options as an expense - a change the company will make when new accounting rules are finalized.

International Business Machines Corp., said it plans to adopt the still-controversial accounting treatment after the Financial Accounting Standards Board (FASB) defines the appropriate regulations, according to news reports. FASB has proposed that publicly held companies begin treating all stock-based compensation as an expense.

A large union pension fund filed the options expensing resolution that captured 53.6% of shares voted at IBM’s annual meeting, while 46.4% voted against it. Seven other investor resolutions failed, including measures to re-examine executive compensation and change the company’s retirement plans for employees. One shareholder proposal to prevent the company from including pension fund gains in the profit figures that help determine executive compensation got 37.5% support, double the level of support a year ago.

The proposal with the third highest backing, at 34%, dealt with cumulative voting in the election of directors.

Proposals that sought the return to earlier pension and retirement benefits, the further disclosure of executive perks and benefits, and the adoption of certain principles of doing business in China each received backing by less than 20% of the ballots cast.

A proposal by the Teamsters union’s funds on disclosure on political contributions, which IBM said it does not make, was also defeated. A proposal that asked for a review of compensation policies was also turned aside.

Also during the meeting, several retirees and current employees complained to Palmisano about IBM’s administration of pensions (see   Murphy’s Law: IBM Loses Cash Balance Ruling , Off-Balance ). The company is embroiled in a federal class-action lawsuit over its 1990s shift to “cash-balance” pension funds, which a judge has ruled discriminates against older workers. Palmisano said the company expects to win that case on appeal, and said IBM is “beyond the industry norm at taking care of retirees.”