Silicon Valley and Washington, D.C., are separated by some 3,000 miles and three time zones.
But if you want to figure out the real distance between the nation's tech center and its political center, toss the road atlas aside and tune into the bicoastal debate over how corporations should account for stock options.
When it comes to this issue, the two coasts are truly worlds apart.
The tech industry believes that the push to get companies to change options accounting is a politically motivated sham. Let politicians change the rules and you'll only wind up hurting hard-working employees, not the proverbial fat cats. At the same time, technology companies will get slammed with an enormous tax hike.
Washington, however, feels no pity. The options issue is about fairness and truth in accounting. Leave the system as is and you might as well clone Bernie Ebbers formerly of WorldCom fame--because that's what you'll get.
Let politicians change the rules and you'll only wind up hurting hard-working employees, not the proverbial fat cats.
There are the obvious differences in background and personal motivation for each side of the argument. But the drive and determination of each coast to promote its respective position is equally strong. And that's why this contretemps is in danger of turning into a serious mess: Neither side is going to back down.
If the nation's politicians expect Silicon Valley to fall in line on the issue of expensing stock options, they're living in a fantasy world. Flipping through my Rolodex this past week, I couldn't find one solitary technology type willing to support even the mildest proposal to change how corporations account for stock options. The more common response was a verbal "middle finger" shouted in the general direction of the nation's capital.
No surprises, there. The options argument is not just about putting food on the table--make that a lot of food, in some cases--but about the way the computer industry views itself. Tech companies believe they belong in a different category, say, from the likes of Coca-Cola, The Washington Post Co. and Bank One--all which recently decided to begin expensing stock options.
Tech titans also suggested they will remember to support friends--and shun foes--in Washington next November. An empty threat? Perhaps, but consider this: In the last national election, the computer industry contributed more than $40 million (52 percent to Democrats, 46 percent to Republicans).
There probably will be political hell to pay at the ballot box, as the steamroller is too far along in this process to come to a quick stop. The system will get changed; the only question now is how.
Stereotypes and realities
I wonder how many congressmen and senators truly understand accounting law in all its complexity. My hunch is that the number is few. Congress' accounting is in such a shambles that the General Accounting Office hasn't signed off on its numbers for the past five years. Think about it: Would you want these folks making executive decisions about accounting policy?
One can blame a corrupt system that allowed the pigs to feed at the trough, but there's nothing inherently corrupt about the concept of awarding options.
Yet it's silly to say that Silicon Valley is harboring dozens of options whiners, as some critics have suggested, with no degree of schadenfreude. The stereotype misses the fact that for every fat cat waltzing off with an exorbitant options package, there are thousands of regular employees who have used options grants to buy houses and put their kids through school.
Options were finally issued to the Valley's rank and file in the last few years. It remains--for most people--the only shot they'll ever have of making some decent money. One can blame a corrupt system that allowed the pigs to feed at the trough, but there's nothing inherently corrupt about the concept of awarding options.
And for the record, corporations do pay for stock options. By diluting the number of shares outstanding, they lower their overall earnings per share. The options are then valued again once the employee cashes in. Then, and only then, does the company know the actual value of the shares.
I'd sleep a lot better knowing the job of sorting things out had been left to accounting professionals, not politicians. Unfortunately, that's not how this story will end. With so many in the hunt to nail a political hide to the wall, professionalism is doomed to play backseat to politics.