Rodent Regatta

Buffett on stock options

Warren Buffett wrote this article for the Washington Post last week. It may give you a clearer understanding of stock options, the shareholder’s viewpoint, the employee’s viewpoint and the accounting debate. Here’s a teaser:

The argument, it should be emphasized, was not about the use of options. Companies could then, as now, compensate employees in any manner they wished. They could use cash, cars, trips to Hawaii or options as rewards—whatever they felt would be most effective in motivating employees.
But those other forms of compensation had to be recorded as an expense, whereas options—which were, and still are, awarded in wildly disproportionate amounts to the top dogs—simply weren’t counted.