By James McNair
The Cincinnati Enquirer

Cincinnati Financial Corp. has rejected a shareholder proposal that called for the company to book its stock options as expenses.

The Fairfield-based parent of Cincinnati Insurance Co. said more than 70 percent of the votes cast at the company's annual meeting Saturday voted against the measure introduced by the Central Laborers' Pension, Welfare & Annuity Funds of Jacksonville, Ill. The board had urged shareholders to turn it down.

"While we are willing to make a future accounting change, our shareholders agreed to wait for an accounting regulatory body to introduce planned new rules and mandate a standard methodology for all companies to follow," said John J. Schiff Jr., Cincinnati Financial's chairman and CEO.

The proposal was one of several dozen considered at annual meetings in 2003. Investment guru Warren Buffett last year came out in favor of amending corporate accounting policies by factoring stock options into the income statement. Companies such as General Electric and Coca-Cola put it into practice, even though the Financial Accounting Standards Board has not required it.

Shareholder sentiment is leaning toward mandating the expensing of options. At the U.S. Bank shareholders meeting last Tuesday, 60 percent of voting shares favored such a rule, prompting the company's board to consider it. Likewise, PPG Industries directors took under advisement an options-expensing proposal that won 52 percent of the shareholder vote Thursday.

Barry McAnarney, executive director of the Central Laborers fund, said the inclusion of stock options with other expenses gives shareholders a truer picture of the company's financial health.

"When they don't include stock options in the expenses, you don't know what the total cost is to run the company," McAnarney said.

E-mail jmcnair@enquirer.com