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New York Times July 14, 2002
Lieberman's Pro-Business Views May Haunt Him By DAVID E. ROSENBAUM
WASHINGTON, July 13 - More than most other Democrats in Congress - and far more than the others with presidential ambitions - Senator Joseph I. Lieberman has been a champion of business interests in general and generous stock options in particular. Now those positions may come back to haunt him.
The stance on the side of business has served him well in Connecticut, the state with the highest per capita income and the home of large insurance and pharmaceutical companies, military contractors and many corporate executives who commute to New York.
It has helped him raise large sums of money for his election campaigns, and his close relationship with business was probably a factor that led Al Gore to pick him as running mate in 2000.
But now, with corporate scandals at the top of the news and Democrats hoping enough of the tarnish rubs off on Republicans to help Democrats in this fall's Congressional elections, Mr. Lieberman, who is seriously considering running for president in 2004, finds himself in an awkward and somewhat defensive position, and he is rethinking some long-held views.
In an interview in his office, Mr. Lieberman repeated several times that he was "proud to consider myself a pro-business Democrat." He said he had no regrets about business-friendly positions he had taken over the years, such as his opposition to tighter accounting rules for stock options and support for restrictions on lawsuits against companies and their accountants.
But he went to great lengths to dispel any notion that he was an apologist for corporate misconduct. He expressed outrage at "greedy individuals" who "did things that were illegal and unethical." He emphasized his advocacy of legislation moving through the Senate that would impose stiffer criminal penalties for corporate wrongdoing.
He also promised that in the fall, the Governmental Affairs Committee, of which he is chairman, would investigate the Enron collapse, an inquiry that has been sidetracked because the committee is dealing with President Bush's proposal for a Department of Homeland Security.
Without being asked, Mr. Lieberman denounced as "sloppy journalism" several recent reports that he was close to the accounting industry and had opposed the plan of Arthur D. Levitt, the former chairman of the Securities and Exchange Commission, to prohibit accounting firms from doing consulting work for companies whose books they audited. In fact, Mr. Lieberman said he supported the Levitt proposal, and Mr. Levitt confirmed that in a telephone interview.
Mr. Lieberman's reputation as a friend of accountants dates to 1993, when he mobilized the Senate to block a proposed rule by accounting regulators to require companies to list stock options as a business expense on their financial statements.
The issue arose again this year after top executives at Enron and other companies made hundreds of millions of dollars before their companies went under by selling stock they had bought with options. The options - rights to buy stock at a fixed price after the market price has risen - gave these executives an incentive to cook the books to keep the market price high.
Mr. Lieberman continues to oppose the change in accounting procedures. It is "intellectually irrational," he said, to put a value on stock options when no one knows what they are worth until the stock is sold.
Most important, Mr. Lieberman said, changes in the accounting rules would lead companies to drop stock options they give to ordinary workers. "A lot of average people are getting a lot of stock options," he said, and this lets them "buy a house and send their kids to college."
An increasing number of companies are indeed awarding stock options to rank-and-file workers. But a survey by the National Center for Employee Ownership, a research institute that favors stock options, found that 70 percent of all stock options in publicly traded companies are given to managers, and that about 50 percent are given to the most senior executives.
The average value of stock options to a senior executive, the survey showed, is $512,000. The average value to hourly workers is $8,000.
Corey Rosen, executive director of the California-based center, said: "The distribution is still wildly skewed toward top management. They are at such different scales they ought to be treated in a completely different way."
In light of the corporate scandals, Mr. Lieberman said he had modified his views on stock options. He said he could now support Senator John McCain's proposal to prohibit top executives from selling stock they bought with options as long as they worked for the company. He could even support requiring companies to record options given to top executives as operating expenses, if a way could be found to do that and protect options awarded to lower-level employees.
Does he worry about the grief such changes would cause constituents and donors who are top executives?
"You'd be surprised," Mr. Lieberman replied, "how little I hear from those people."