This morning, Silicon Valley was waking up to what could be the financial equivalent of a double shot of Starbucks (Nasdaq: SBUX ) espresso.
Following last week's vote by Hewlett-Packard (NYSE: HPQ ) shareholders to expense options, PeopleSoft's (Nasdaq: PSFT ) common-stock owners delivered the same message to management during yesterday's annual meeting. The pension fund for the American Federation of State, County, and Municipal Employees put it up for a vote, and shareholders approved expensing by a margin of 132.97 million votes for versus 113.40 million votes against.
PeopleSoft's board of directors was opposed to the measure on the grounds that options are a key incentive for employees. Another reason could be that, as reported in its most recent 10-K filing, expensing options would have turned PeopleSoft's $85 million of 2003 net income into a $75 million net loss.
Interestingly, the options debate overshadowed the proposed buyout of PeopleSoft by rival Oracle (Nasdaq: ORCL ) , although published reports say some institutional shareholders lobbied in favor of the combination, as I did yesterday. But focusing on options was probably a good thing. Silicon Valley needs the wake-up call.
As we've written here many times, stock options might look like free money, but they have a cost that shareholders ultimately must bear. Fellow Fool contributor Jeff Hwang provided a clear example of this recently, in his story about Texas Instruments (NYSE: TXN ) buying back shares to cover up options-related dilution.
With HP and now PeopleSoft shareholders weighing in from Silicon Valley's backyard, the people have spoken. Is anyone in the boardroom listening?
Do you wish your funds were looking out for your interests? Find the ones that do. Try Shannon Zimmerman'sMotley Fool Champion Fundsrisk-free for 30 days.