Lobbying and Opposition to SFAS No. 123(R): An Examination of Campaign Contributions from CEOs and PACs

What is it about?

We study lobbying by CEOs and company-affiliated political action committees (PACs) intended to influence accounting standards. In 2003, Congress considered bills to block a new accounting standard requiring firms to report the fair value of stock options granted to executives. Recording the fair value of stock options would decrease net income and potentially lead firms to reduce executive compensation. We study firms targeted by shareholder proposals asking the firm to voluntarily expense the fair value of options. CEOs of firms opposed to expensing the fair value donate more to legislators who sponsor those bills than firms that choose to voluntarily expense the fair value of options. Affiliated PACs donate more to bill sponsors only when the CEO contributes to the PAC. Our results suggest CEO lobbying is related more to executives' interest in preserving excessive pay. In contrast, PAC lobbying relates more to an interest in preserving earnings levels.

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