Let the news go forth here and now: Software maker and services provider PeopleSoft
Major premise: "Expensing stock options will discourage companies from using them as incentives for innovation."
Minor premise: "In a competitive global economy, innovation and the creation of shareholder value have helped the U.S. maintain its economic leadership."
Then, the unstated conclusion: Therefore, stock options help the U.S. maintain its economic leadership.
Oh, please! Notice the clever rhetorical trick. He never says PeopleSoft has created shareholder value, but he puts "shareholder value" side by side with innovation and economic leadership. Who can argue with those? This is the print version of a candidate who stands next to a popular president. The association goes without saying. It's clear.
Parker does this because what's not clear is whether stock options have helped PeopleSoft create shareholder value. A look at a stock chart since PeopleSoft's 1993 IPO shows that if options were responsible for attracting and retaining employees essential to success, then they made some shareholders giddily rich prior to 1996 and at key points since then. But the stock's returns have been flat for over six years. Parker's syllogism fails.
If stock options matter so much -- and clearly life is different for the human resources department at a young company versus a large, established behemoth -- just give employees grants of restricted stock. The only difference? The company must expense them.
The best observation belongs to Morgan Stanley's Chief Investment Strategist Byron Wein, who is quoted in today's New York Times: "[Anyone] who says that stock options aren't an expense destroys his credibility on all other issues."
'Nuff said.
