[Politech] Jim Delong's dissenting view on stock options expensing

From: Declan McCullagh (declan@private)
Date: Wed Apr 07 2004 - 11:00:25 PDT

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    -------- Original Message --------
    Subject: stock options
    Date: Wed, 7 Apr 2004 08:30:11 -0400
    From: Jim DeLong <JDeLong@private>
    To: 'Declan McCullagh' <declan@private>
    Declan --
    Are you willing to pass on something that totally disagrees with Martin
    Hutchinson?  See my ipcentral post of yesterday:
    "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
    "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
    &ID=262&cat=MIR  (the deep link is here
    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
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