>As an example of that approach, Sen. Lieberman says Democratic
>moderates should oppose pending proposals that would require
>companies to account for stock options as business expenses. The
>change, he warns, might choke off stock-option grants benefiting
>middle-income workers....
Wow, Lieberman's worse than Greenspan on this.
<http://www.federalreserve.gov/boarddocs/speeches/2002/20020503/default.htm>
>I fear that the failure to expense stock option grants has
>introduced a significant distortion in reported earnings--and one
>that has grown with the increasing prevalence of this form of
>compensation.
>
>[...]
>
>As I noted at the outset, some view the current treatment of option
>grants as having been a major aid in raising capital to finance the
>rapid exploitation of advanced technologies. While the vital
>contribution of new technology to the growth of our economy is
>evident to all, not all new ideas create value on net. Not all new
>ideas should be financed. In recent years, substantial capital
>arguably was wasted on a number of enterprises whose prospects
>appeared more promising than they turned out to be. This waste is an
>inevitable byproduct of the risk-taking that generates the growth in
>our economy. However, the amount of waste becomes unnecessarily
>large when the earnings reports that help investors allocate
>investment are inaccurate.
>
>[...]
>
>But option expensing in no way precludes the issuance of options. To
>be sure, lower reported earnings as a result of expensing, should it
>temper stock price increases, could inhibit option issuance. But,
>again, that inhibition would be appropriate because it would reflect
>the correction of misinformation.
>
>It is no more valid, in my judgment, to assume that option grant
>expense is zero than to arbitrarily assume depreciation charges are
>zero. Both assumptions, excluding interest, increase reported pretax
>earnings. Both imply that the inputs that produce valued corporate
>outputs are free.