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IBM Corp. shareholders voted Tuesday to require the company to treat stock options as a business expense, though the impact of the decision is muted because financial regulators are on the verge of imposing the same rule. The options proposal, which is non-binding, was put forward by a large union pension fund and won the support of 54 percent of stockholders at IBM’s annual meeting. Seven other resolutions sponsored by investors failed, including measures to re-examine executive compensation and change the company’s retirement plans for employees. When the vote on the options proposal was announced, chairman and CEO Sam Palmisano responded that IBM would expense options when the Financial Accounting Standards Board officially requires it. FASB has proposed that publicly held companies begin treating all stock-based compensation as an expense. That is a response to widespread complaints that options were doled out excessively in recent years by companies that didn’t fully disclose their cost to shareholders. The rule could take effect for fiscal years beginning after Dec. 15. IBM’s fiscal year begins Jan. 1. With IBM coming off a successful 2003 — profits of $7.6 billion — and increasing its dividend Tuesday by two cents, to 18 cents per share, no shareholders expressed beefs with the company’s business strategy. However, several retirees and current employees complained to Palmisano about IBM’s administration of pensions. The company is embroiled in a federal class-action lawsuit over its 1990s shift to “cash-balance” pension funds, which a judge has ruled discriminates against older workers. Palmisano said the company expects to win that case on appeal, and said IBM is “beyond the industry norm at taking care of retirees.” One shareholder proposal to prevent the company from including pension fund gains in the profit figures that help determine executive compensation got 37.5 percent support, up from 18 percent last year. A few people pressed Palmisano about the increasing high-tech industry practice of moving skilled work to Asia. One employee suggested that IBM give affected workers more than 30 days to find new jobs within the company. IBM shares rose 95 cents to $91.38 in afternoon trading on the New York Stock Exchange. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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