Jim Delong's dissenting view on stock options expensing

[Declan McCullagh <declan () well com>]

-------- Original Message --------
Subject: stock options
Date: Wed, 7 Apr 2004 08:30:11 -0400
From: Jim DeLong <JDeLong () pff org>
To: 'Declan McCullagh' <declan () well com>

Declan --
Are you willing to pass on something that totally disagrees with Martin
Hutchinson?  See my ipcentral post of yesterday:
Best,
Jim



04.06.2004
STOCK OPTIONS: IT'S OVER POWER & MONEY, NOT GOOD ACCOUNTING
http://ipcentral.info/blog/archives/2004_04_01_index.shtml#10812645782972711
1
"The debate whether stock option grants should be treated as corporate
expenses is going badly for the tech world. As expected, FASB is
recommending such treatment, so the tech companies are almost to the last
ditch, which would be reversal of an FASB rule by Congress -- unlikely, in
an election year dominated by demagoguery over evil corporations.

"One reason for the defeat is that the tech companies seem to have
misunderstood the nature of the fight. They assume it is really about
accounting, and that if only they explain often enough that treating options
as expenses will not in fact help investors then their opponents will
relent.

"Sorry, guys. The pro-expense 'em forces do not care about helping
investors; they care about discouraging stock options.

"In the modern corporation, intangible assets now constitute 70% or so of
the value of the company, a shift from 25 years ago, when 75% of the value
was in tangible assets. By using options, companies make the creators of
these intangible assets into owners, and venture capitalists make the
creative classes into partners. Options are a complicated, but quite
creative, solution to a number of difficult problems in the valuation of
intellect-based assets.

"The idea of making the creative classes into owners is not welcomed by old
line capitalists, organized labor, public employees, and other power
centers. Hence the fight to discourage options.

"If you think this view is paranoid, read the whole argument, which appeared
in the Milken Institute Review
http://www.milkeninstitute.org/publications/publications.taf?function=detail
&ID=262&cat=MIR  (the deep link is here
http://www.milkeninstitute.org/publications/review/2003_3/46_55mr17.pdf),
along with an earlier background paper http://cei.org/gencon/025,03055.cfm.
posted by James DeLong : 4/6/2004 11:16:18 AM



James V. DeLong
Senior Fellow & Director, Center for the Study of
     Digital Property
Progress & Freedom Foundation
1401 H St., NW
Washington, DC 20005
(202) 969-2944 Direct
(202) 289-8928
jdelong () pff org
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