- The Washington Times - Thursday, March 30, 2000

Republican leaders joined the Clinton administration yesterday in a pledge to pass legislation this year to ensure that hourly workers such as secretaries and mail clerks can earn stock options just like corporate executives.

"It makes no difference if you work in the corporate boardroom or on the factory floor everyone should be able to share in the success of the company," said Sen. Mitch McConnell, a Kentucky Republican who drafted the legislation in recent weeks along with Labor Secretary Alexis M. Herman.

The bill, which Mr. McConnell said faces almost no opposition in Congress, is designed to overturn a controversial Department of Labor interpretive letter issued in February that said companies must take the value of stock options into account in calculating the overtime pay of their hourly workers.

Since most stock options give employees the right to purchase company stock at a low, fixed rate any time after a six-month holding period, businesses said it would be nearly impossible to determine their exact value.

Business groups said the regulation was too costly and complex to carry out. Most corporations stopped offering stock options to low-level employees because of the interpretive letter.

After an initial outcry, Mrs. Herman agreed with Republican leaders that the regulation was too onerous and that the Depression-era Fair Labor Standards Act which established the overtime rules should be amended to remove the roadblock.

The legislation introduced yesterday would create an exemption from the overtime calculations for profits from stock options and other equity-sharing arrangements.

"Our economy is changing at warp speed," said Mrs. Herman. "In today's tight labor market, many employers find that using stock options is an important tool to attract and retain good workers."

Stock options currently are earned by about 6 million workers, mostly at technology firms and Fortune 500 corporations like Motorola, IBM, General Electric, Pepsico and GTE. About 26 million hourly workers would become eligible for the benefits under the bill.

Corporate executives and managers have received stock options for years, and the innovation is credited with creating a new class of millionaires in the United States. The total value of stock options currently outstanding is estimated at $800 billion.

Companies like them because they give workers an incentive to be productive and make the company more profitable, which drives up the value of the stock. Workers like them because they can share in the company profits and potentially become wealthy.

Congress also stands to gain from a wider availability of stock options. When employees exercise their right to purchase stocks, the billions of dollars in profits they realize usually are taxed at the highest income tax rates. For that reason, stock options also have been credited with helping to create the tidal wave of tax revenue producing surpluses in federal and state treasuries.

On top of that, economists say the growth of stock options helps explain a puzzle in the "new economy:" the abundance of jobs and wealth that mysteriously co-exists with low inflation and modest wage rates.

By providing companies with an alternative way of compensating employees for good performance, economists say stock options may be helping to hold down overall wage and inflation rates.

Legislators from both parties sought to associate themselves with the "new economy" virtues addressed by the bill.

"Stock options are an important way to bring more wealth to employees who might not otherwise have had the chance," said Tim Roemer, co-chairman of the 65-member New Democrat Coalition. The centrist group claims credit for bringing the Clinton administration and Republican leaders together on the issue.

Republicans exulted at the rare opportunity to update and amend a Depression-era labor law to reflect the more flexible, competitive and entrepreneurial economy of the 21st century. Democrats and labor union in the past have resisted such efforts.

"When workers have a stake in the outcome, they'll obviously have more of a stake in the system," said Sen. Spencer Abraham, Michigan Republican.

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