Siebel Shareholders Reject Option Expensing

Siebel Systems Inc. shareholders rejected a proposal Wednesday that urged the software maker to record the cost of employee stock options as an expense in quarterly financial reports.

Investors voted down two shareholder proposals at Siebel’s annual meeting near its headquarters in San Mateo, Calif. The second requested among other things that certain performance measures be met before workers can exercise their stock options, the right to buy or sell the stock at a specific price.

Chairman and Chief Executive Thomas Siebel has been criticized by investors for what they considered lavish stock-based pay. Siebel said employee ownership has been a part of the software maker since he started it with his own money a decade ago.

“We wanted to build a company, when it was all done, that was an employee-owned company,” Siebel told investors.

Siebel reported in the proxy that its top six executives held 29.3% of the stock options at the end of 2002. Siebel drew a salary of only $1 from the company last year while he reaped $34.6 million by exercising stock options, according to the proxy statement mailed to investors.

About a dozen protesters gathered in front of the hotel where shareholders met across the street from the software maker’s headquarters. Before the annual meeting, the protesters, brought together by a local labor group, chanted “CEOs on the loose, stop the corporate pay abuse” and carried signs criticizing Siebel.

“Times have changed,” Richard Ferlauto, a director of pension policy for the American Federation of State, County and Municipal Employees said during a question-and-answer session at the meeting. His organization sponsored the proposal urging the company to expense stock options.

The nonbonding proposal to expense stock options was defeated by 65% of the votes, Siebel said, and the other shareholder proposal was rejected by 62%.

Siebel shares fell 12 cents to $11.58 in Nasdaq trading.