Options, Innovation and Silicon Valley.

Bruce Nussbaum

I always thought that options were a terrific incentive for promoting innovation, startups, growth, wealth, mobility and all those good things that make our society better and richer. Actually, I still do. By and large, options were used effectively and efficiently in the 90s in the New Economy--they were spread around from top to bottom--and they helped create lots of new companies. By and large, options were not used effectively in the Old Economy--they were given disproportionately to a tiny number of top execs, and they didn't act as an incentive to innovation. In the end, option abuses, mostly in the Old Economy, led to a change in the accounting rules for options and pretty much killed them as a financial incentive to growth. This was one reform that hurt innovation.

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