In a meeting with FASB execs and a more raucous City Hall rally, Silicon Valley entrepreneurs raise a hue and cry against expensing stock options.
Whether they were participating in a roundtable discussion with Financial Accounting Standards Board leaders or speaking before a rally of hundreds of tech workers down the street in downtown Palo Alto, Silicon Valley tech execs made one thing abundantly clear Thursday: They think FASB's proposed rule requiring companies to expense stock options is a really bad idea.
It was a day of dichotomies. In one setting, fervent tech-company representatives explained their opposition to the proposed rule to FASB officials during morning and afternoon sessions in a low-key hotel meeting room. Meanwhile, outside Palo Alto, Calif., City Hall, a lunchtime rally was highlighted by Jim Cunneen, CEO of the Silicon Valley Chamber of Commerce, repeating the mantra: "You are the faces of employee stock options," which was met each time with unified cries of "Yes, we are!"
The FASB, which sets U.S. accounting policy, wants companies to begin expensing the value of stock-option awards to employees in this December. But tech firms say the move--which could decrease the amount of reported earnings each quarter--would stifle their ability to recruit and retain talent.
On hand with Cunneen to lend healthy doses of pro-options rhetoric to the rally were Andy Bechtolsheim, one of Sun Microsystems' original employees who recently rejoined Sun; Tom Campbell, former U.S. congressman and current dean of the Haas School of Business at the University of California at Berkeley; and Peter Giles, CEO of Silicon Valley's Tech Museum of Innovation. They were joined by employees from companies including Cisco Systems, Genentech, and Sun, and Kim Polese, the veteran Silicon Valley entrepreneur and founder of software company Marimba.
At the rally, Bechtolsheim said his concerns center on the impact FASB's proposed rule would have on startups that depend on options to attract employees. If they'd had to log options as expenses, he told the crowd, three-quarters of Silicon Valley's startups never would have gotten off the ground. "This is a time when we need more innovation than ever," he said. "If you want to go backwards to the Dark Ages, that's not a good idea."
That message was echoed during the afternoon session of the FASB roundtable, where Marc Jones, CEO of network-management vendor Visionael, described stock options as indispensable. "Money doesn't get people motivated," Jones said. "Ownership, and the opportunity to be a part of something and move it forward, that motivates people." Deborah Nightingale, a project manager at Sun, agreed, telling the FASB leaders that when she worked for a public company that didn't grant options, she didn't care about the company's stock performance. With options, Nightingale said she believes that she plays an active role in Sun's health. "If I can create value for them, I'm creating value for myself," she said.
It's not just rank-and-file employees who have their dander up. Ron Ricci, a VP at Cisco, said stock options have helped his family live in expensive Northern California. "The only reason I'm still living here is stock options," he said.
Polese, who participated in the FASB roundtable and also attended the rally, said in an interview that shareholders who want to expense options have confused the issue with corporate scandals in the news. But expensing options isn't in shareholders' best interests, Polese says. "Ultimately, it's the investors who are going to be victimized."
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