Table: Why Defenders Disagree
-- Unlike salaries or other perks, granting options requires no cash outlay from companies. Since there is no real cost to the company to deduct, doing so will unjustly penalize earnings.
-- There are no universal standards for expensing options; all valuation methods require big assumptions and estimates. So expensing them will reduce the accuracy of income statements, and leave them open to manipulation.
-- Deducting the cost of options will reduce earnings, which is likely to drive down share prices.
-- Rather than take the hit to earnings, companies will issue far fewer options. That would hurt morale, limit a key tool used to lure talent, and inhibit companies from aligning employee and shareholder interests.
-- Tech firms argue that generous option grants have spurred the risk-taking and entrepreneurship so crucial to innovation. Expensing options risks damaging that benefit.