Opposing view: Improper accounting is the
problem, not a key employee benefit.
The Senate and
House are right to block efforts by the anti-business crowd to make stock
options a mandatory expense.
Companies
that choose not to expense options already are required to account for
stock-option grants to employees on their balance sheets by the footnote method,
so options-related financial information is available to investors. The current
attack on the use of stock options is no more than political witch hunting in
the wake of the recent accounting scandals.
Forcing companies to expense options eliminates a critical incentive
encouraging employee ownership, a practice that Congress has often promoted, by
increasing the cost to companies of providing this benefit to their employees.
If companies want to expense stock options, they can -- and many already do.
That should be their choice.
A 1999 study
by consulting firm William M. Mercer found that 17% of large public companies
offer stock options to most or all of their employees. Although the practice is
often associated with technology and Internet companies, granting options goes
well beyond IT companies, including major fast-food chains and well-known
retailers. Employees will lose the chance to share in their employers' successes
if stock-option expensing is mandated.
Under the McCain-Levin proposal in the Senate, innovation
would suffer as well. Limiting the deductions companies can take when stock
options are exercised would effectively raise corporate taxes, leaving less for
investment in research and development and creating a drag on the economy as a
whole. Corporate spending creates jobs; inappropriate corporate taxes destroy
them.
Let us be clear: Stock options are
not what brought down Enron and caused thousands of employees to lose their
retirement savings. Nor is accounting for options responsible for the troubles
at WorldCom.
Improper and perhaps illegal
accounting caused both.
Punish bad actors
by creating stringent penalties for corporate malfeasance. Enact accounting
reforms where appropriate. But do not harm an employee's ability to prosper with
his or her company. Do not stifle innovation at the expense of our need to grow
this economy by attacking an important employee benefit: stock options.
Harris N. Miller is president of the
Information Technology Association of America, a trade association for the
high-tech industry.
Document 14 of 19. 