(January 11 – 18:00 ET) – Securities and Exchange Commission Chairman Arthur Levitt today urged prominent institutional and individual investors and investor advocates to voice their opinions to the Nasdaq as it considers new rules regarding shareholder approval of stock option grants.

Both the New York Stock Exchange and Nasdaq allow companies to implement many option plans without shareholder approval, as long as at least one-half of the grants go to employees other than officers and directors. “I strongly believe that shareholder approval should be required for plans that permit officers and directors to receive stock or stock options. Shareholders have the right to judge whether officers and directors are acting fairly in setting their own equity-based compensation,” says Levitt.

In fact, Levitt said, shareholders should have a say even in cases where officers may not be getting options. “Shareholders must have a voice when their investment in a company is being materially diluted by such plans.”

Levitt acknowledged that option plans have been a powerful recruiting and motivational tool, and said he doesn’t wish to stamp out these plans, only to ensure they are fair to shareholders, too. He has asked both the NYSE and Nasdaq to implement standards. The NYSE has come up with a plan and wants Nasdaq to live up to the same standards. Nasdaq has requested comment on the issue. Nasdaq’s deadline for comments is February 5.

“It is absolutely essential that the Nasdaq Stock Market benefit from investors’ perspectives as it considers this issue. At stake is the rightful balance between shareholder and management interests, and, in the end, public confidence. I urge you not to miss the opportunity to comment on this matter of fundamental fairness and sound corporate governance.”
-IE Staff