There has been a huge debate in corporate America around how companies should account for the stock options issued to employees. Huge names like Warren Buffet have stated that it is time for corporations to expense charges associated with stock options, while the entire tech industry has fought against it. While I am no Warren Buffet (he actually has more hair than I do... oh and more cash too), I feel like weighing in on this issue.
In my opinion it is impossible to overstate the importance of this issue. At stake here is the very entrepreneurial soul of America. While Buffet is correct when he states that there are real costs associated with stock options his assessment that it is better to be approximately right than precisely wrong is incorrect in this instance. While today's method of simply ignoring the cost is poor, forcing companies to expense options would do incredible damage to the entrepreneurial energy of America.
Expensing options would force many companies to stop issuing options all together, and thus they will have a harder time attracting employees. To thousands of Americans stock options remain the catalyst behind their willingness to take a risk in a high tech venture. Every day that goes by countries like India are producing high tech college graduates that are starting companies that are eating away at the low end of the technology marketplace. To thrive America needs to continue to innovate and create new high tech markets like Nanotech... but without options how many people will be willing to take a huge risk in starting this industries if they won't get a proportional return for the risk they took?
Given my opinion I was glad to see that the house of representatives shot down a bill to force companies to expense options. Until the finance gurus figure out a better way to calculate the true costs of options we should continue to be precisely wrong, because to be approximately right in this matter is far more dangerous.
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