November 5, 2003

The Honorable Michael B. Enzi
United States Senate
Washington, DC 20510

Dear Senator Enzi:

We write as the chairman and president of the American Business Conference (ABC), a Washington-based coalition of CEOs of midsize growth companies.

According to press reports, you are drafting legislation that would require companies to expense for accounting purposes stock options granted to the top five executives of a firm while preserving the current accounting treatment of stock options for all other employees.

If the press reports are accurate, we congratulate you for your efforts. To be sure, ABC continues to believe that no employee stock options should be expensed. We believe that options are already properly accounted for in terms of dilution and that there is no credible, fair, and accurate way to measure the value of options at issuance. For that reason, we remain very strong supporters of S. 979.

Nevertheless, having met multiple times with members of the FASB on this issue we recognize that the Board, as one of its members candidly told us last month, is "set in concrete" on the matter of expensing. While we deeply respect the expertise and dedication of the FASB, the Board's position on stock options has come to resemble a quasi-religious quest to impose an expensing rule regardless of the objections of much of the business community, regardless of the very real practical difficulties such a rule would raise, and regardless of the effect such a rule would have on the ability of entrepreneurs to attract, retain, and motivate key employees.

It seems clear that the Board's intransigence has in part been made possible by popular dissatisfaction with current executive compensation packages. Essentially, expensing has been "sold" to many opinion-leaders as a way to curtail the growth of such packages. While we believe this perspective is naïve and misdirected for a variety of reasons, there is no discounting its force.

Your draft legislation comes to grip with the perceived problem of options-fueled executive compensation while maintaining the amply documented benefits of stock options for other employees. Moreover, it limits the unintended consequences in regard to measurement and non-comparability that will inevitably accompany the FASB's mandatory expensing proposal if it goes into effect.

Again, we congratulate you for everything you have done to insure responsible Congressional oversight on the matter of stock options accounting. We will continue to support your efforts and those of your Senate colleagues to insure that a responsible stock options accounting rule is eventually put into place

Sincerely,

/s/   Alfred P. West, Jr., Chairman, American Business Conference
CEO, SEI Investment Company

/s/   John Endean, President of American Business Conference

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