PeopleSoft's People Speak Up

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?

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Motley Fool contributor Tim Beyers gets an early wake-up call every day -- from his kids. Tim has no stake in any of the companies named, and you can view his Fool profile here.