Option Expensing Develops at Kodak Shareholders Meeting

May 8, 2003 (PLANSPONSOR.com) - Shareholders at Eastman Kodak Co. have passed a resolution to account for employee stock options as an expense for financial reporting purposes.

At Kodak’s annual meeting the shareholders voted in favor of the proposal by a margin of about 56% to 44%. The Rochester, New York-based company’s board of directors recommended a vote against the proposal, saying that while it was in favor of accurate reporting of operational earnings, the plan would not be in Kodak’s best interest, according to a Reuters report.

Chief Executive Dan Carp tried to dissuade shareholders from approving the resolution since a uniform method of computing the fair value of an employee stock option does not yet exist and that none of Kodak’s peers have implemented such a plan.   “These are likely to be moot points now that the Financial Accounting Standards Board (FASB) has determined that options must be expensed, obviously Kodak intends to adhere to a final FASB standard,” once it is finalized, he said (See  FASB Says Yes to Option Expensing ).

Overall, the company had five shareholder proposals up for a vote at the its annual meeting that included the approval of a slate of board members, which passed. It also had plans for addressing the company’s environmental waste and to change the way options were granted as executive compensation, both of which were defeated.

Kodak is the latest company to see shareholder option expensing proposals pass.   Recently shareholders at Delta Air Lines (See  Delta Shareholders Approve Option Expensing, Severance Limits ) and Apple Computer (See  Apple Shareholders Vote Yes for Option Expensing ) passed similar proposals despite board recommendations for a no vote.