Lobbying and opposition to SFAS no. 123(R): An examination of campaign contributions from CEOs and PACs

Abstract

We examine the contributions of CEOs and company-affiliated political action committees (PACs) to members of Congress who supported a moratorium on the Financial Accounting Standards Board’s 2003 proposed standard to require firms to expense stock-based compensation at fair value. Our evidence—based on a sample of firms targeted by shareholder proposals to voluntarily expense employee stock options—indicates that CEOs and PACs had different motivations for lobbying on this policy issue. Specifically, we find that opposition to shareholder proposals varies positively with CEOs’ contributions to the moratorium co-sponsors. However, opposition varies positively with PAC contributions to co-sponsors only when the targeted CEO contributes to the PAC. These results suggest that CEO lobbying relates more to executives’ interests to preserve excessive pay, whereas PAC lobbying relates more to interests in preserving the level of earnings.