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A new accounting rule that has tech companies cringing looks like good news for their lawyers. The Federal Accounting Standards Board announced recently that companies must deduct the value of stock options from their profits, and tech-sector attorneys say the rule will mean a flurry of lawyering. How much? “Tons,” said Jonathan Ocker, a partner at Orrick, Herrington & Sutcliffe who specializes in compensation. “It’ll create work on having to amend plans � shareholder approval plans, and 8-K filings” with the SEC. Compensation specialists throughout Silicon Valley say their phones have been ringing with calls from nervous clients. Ocker said his firm’s employment department has enough staff to absorb the extra work, but Glenn Borromeo, counsel in Pillsbury Winthrop’s San Francisco office, said he expects the firm will have to expand its 20-lawyer compensation division, either through new hires or transfers from other practices. “In the short term, there’s going to be a demand for more lawyers with that expertise,” he said. John Aguirre, a partner at Wilson Sonsini Goodrich & Rosati in Palo Alto, said he anticipates the change will generate steady work for the foreseeable future. “In the coming year, we’re going to spend a lot of time working on new company plans,”he said. “It’s going to create a lot of work for us.” At Fenwick & West, Chairman Gordon Davidson said the accelerating frequency of Valley mergers has made compensation lawyers increasingly busy, and the new stock options rule could result in new hires at his firm. “It won’t double the size of the compensation group or anything, but compensation has been an increasingly important issue,” Davidson said. Compensation plans for high-ranking executives, he added, will require more legal attention than in the past, and a greater focus on alternatives to options, including grants of restricted stock and bigger cash payments. The attorneys said the change had been anticipated — indeed, dreaded — for some time, so some companies had already begun disclosing the value of their option awards. Many others have been considering new ways of awarding bonuses without such deep cuts in reported profits. “People are expecting changes, so they’re starting to adopt omnibus plans,” Ocker said. Some say the demise of stock options has been exaggerated. “I think we’ll see fewer stock options, but I’m not prepared to say there’s going to be this big paradigm shift that everyone’s talking about,” said Fenwick & West partner Scott Spector. That’s largely because stock options are an entrenched part of Valley culture, said Laura Bushnell, a partner in Latham & Watkins’ Menlo Park office. “I think options are here to stay. They’re what employees expect,” she said, adding that while many firms may adjust their policies to minimize options’ impact on profit statements, she expects few to do away with them. Spector said that although he expects to receive some extra work from companies struggling with the new rule, there will be more legal work — and more corporate decision-making — once the Treasury Department clarifies Internal Revenue Code � which will determine what kind of bonuses companies may implement to replace stock options. “That’s a much, much, much more important rule and will generate much more work than the new accounting rules,” he said.

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