Microsoft stands pat on options. Gates has said that the company won’t change the way it accounts for stock options unless the entire industry is forced to. Microsoft accounts for options in the notes to financial statements, but does not expense them. In my opinion, this is the intelligent way to provide the transparency the investing public is looking for. Artificial measures, like accounting for them as an expense, don’t make any sense to me. Issuing an option costs the company nothing at the time that the option is issued. How does one assign a value to the option, then? Black scholes? Will companies be required to buy puts when employees are issued calls? If not, then where does the money represented by the "expense" go to?
Options have been an important tool in the high tech industry — as a way to reduce current payroll expenses by deferring them, and as a means of focusing individuals in a corporation on revenues and profitability, both of which are benefits to the common shareholder. The system isn’t broken.
