Reacting to Opposition to the FASB's "Share-Based Payment" Exposure Draft

question 172

Essay

Reacting to opposition to the FASB's "Share-Based Payment" Exposure Draft, Senator Carl Levin stated, "Stock options are the 800-pound gorilla that has yet to be caged by corporate reform." In reference to a bill that would thwart the FASB's position, Senator John McCain said, "This legislation blocking stock option expensing not only undermines FASB's independence, but undermines the effort to restore confidence in our financial markets as well." Discuss what these two senators meant by their statements.

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Definitions:

Cognitive Dissonance Theory

A theory suggesting that people experience discomfort (dissonance) when their beliefs or behaviors are inconsistent with one another, often leading to changes to reduce the dissonance.

Philip Zimbardo

Philip Zimbardo is a psychologist well-known for his 1971 Stanford prison experiment which highlighted the impact of situational forces on human behavior.

Reliability

The consistency and dependability of a measurement tool or test over time, ensuring that the same results can be repeated under similar conditions.

Validity

The extent to which a test or instrument measures what it is supposed to measure.