As the Financial Standards Accounting Board (FASB) prepares its proposal on mandatory expensing of employee stock options, it's time to revisit the question of if -- and how -- stock options should be expensed. Of particular importance is to look at the long-term implications of the decision at hand. The U.S. economy is struggling to regain a strong footing, to create and sustain new jobs -- all while an increasingly educated global workforce has become more competitive and available at one-third to one-fifth the cost of some U.S. workers.
Do no harm.
Our priority should be to do no harm to the U.S. economy, bolster innovation and improve corporate governance. Instead, we are focusing on mandatory expensing of broad-based stock option plans, which could have a dramatic, negative impact on U.S. competitiveness, technology innovation and future job creation. In addition, current proposals will not make financial statements more accurate or prevent future abuses. The concept of expensing stock options is based on the use of a theoretical estimate of ``expense'' to a company for the use of stock options. No one has figured out how to do this accurately, and all current proposals will lead to numbers which will grossly overestimate the expense in any common-sense way.
Stay competitive.
Despite the very real hardship to some American workers, some tech jobs will continue to move off shore, much as we have seen in other sectors over the past few decades. Let's make America as competitive as possible so we don't disadvantage our companies, our workers or our economy. The key is for these jobs to be replaced with new jobs that focus on next generation technology, and make innovation our key competitive advantage.
It is also important that U.S. companies have the tools to attract the best talent. It is interesting to note that China is currently promoting the use of stock options as part of a five-year economic plan, to attract higher-quality employees and grow their economy.
