Senate Committees Plan Hearings on Stock-Option Grants

Two U.S. Senate panels scheduled hearings on executive stock-option grants as Congress sharpened its focus on a scandal that has touched more than 100 companies.

Deputy Atty. Gen. Paul McNulty, Internal Revenue Service Commissioner Mark Everson and a senior Securities and Exchange Commission official will testify before the Senate Finance Committee on Sept. 6, Sen. Charles E. Grassley (R-Iowa), the panel’s chairman, said Friday.

The Senate Banking Committee also intends to conduct a hearing.

“I continue to ask federal officials to let me know whether the current tax laws are adequate to rein in and prosecute stock-options backdating,” Grassley said. “If the tax laws are inadequate on stock-options backdating, I want to beef them up.”

At least 117 companies have disclosed government investigations or internal probes of the firms’ stock-option policies. The inquiries are intended to determine whether option grant dates were manipulated to benefit the executives receiving the securities.

A stock option allows the holder to buy a company’s shares at a set price for a set period of time. Options were a popular way of attracting employees in the late 1990s and early in this decade.

The Banking Committee, led by Sen. Richard C. Shelby (R-Ala.), will hold a hearing on option backdating after the panel returns Sept. 5 from its summer recess, a spokeswoman for the panel said. The committee is compiling a witness list.

The SEC last month approved rules that for the first time will require companies to explain the value of their options and how they choose grant dates. The Sarbanes-Oxley Act, passed in 2002 after the collapses of Enron Corp. and WorldCom Inc., requires companies to disclose grants within two days.

“There is no need for legislation here,” former SEC Chairman Harvey Pitt said. “There are plenty of tools available to the SEC, as they have amply demonstrated.”

Former executives at Brocade Communications Inc. and Comverse Technology Inc. face criminal charges over option grants by the two companies.