- The Washington Times - Saturday, September 18, 2004

Like many Americans, we are concerned about the loss of good jobs overseas. We must improve our tax and regulatory policies for our competitive advantage. Surely, we should not harm incentives for American workers whether engineers, secretaries or packagers at Hewlett Packard, Intel, Oracle, Cisco or Staple Office Supplies.

The engines of innovation that have long driven U.S. competitiveness and productivity seem to be raring for another strong surge. Spurred by well-timed tax cuts and prudent monetary policy — as well our country’s long love affair with innovation and entrepreneurship — it appears the U.S. economy is again poised for a strong burst of job and wealth creation.

However, there’s a “dog in the manger” — an unregulated, unelected, unaccountable group lead by a chairman who can stop the American job creation engine dead in its tracks, especially creation of high-end, information-intensive, white-collar jobs many unemployed Americans would love to have.

Of course, we’re talking about the Financial Accounting Standards Board (or FASB for short) and its prejudged proposal to force all companies to “expense” all employee stock options up front (whether or not the options ever become valuable). Like most bureaucratic institutions, FASB is exceptionally talented at closing the wrong barn door after the horse is gone and (to mix metaphors) killing the golden goose in the process.

In reaction to accounting scandals that have rocked our nation over the last few years (where was FASB when we needed them?) the FASB now proposes a classic nonsolution to a nonproblem that, if enacted, will be one of the single biggest job-killing provisions ever enacted.

Worse yet, FASB’s muddled proposal (even the “experts” at FASB cannot agree on how stock options should be “valued”) would immediately and perhaps irreversibly accelerate outsourcing of many of our best jobs overseas. You see, the very countries we compete with (India, Russia, China, etc.) are all waking up to the power of broad-based employee ownership that stock options provide. Hey, we all know employee owners almost always work harder and care more about the success of the enterprise — and why not? When was the last time you changed the oil in a rental car?

Yet FASB’s fiat would force all companies to expense options at some yet-to-be-determined, artificially established rate — which would then fluctuate each quarter depending on certain variables, often not under the company’s control. For example: A company’s rising stock price could dramatically increase the “value” of options that might not even vest, i.e. become actually tradable, until years in the future, forcing the company — under FASB’s proposed rules — to take a massive charge against today’s earnings. Understandably, companies large and small are not happy about this — and most if not all tech company leaders state unequivocally that FASB’s proposed rules will force them to shift jobs quickly and permanently out of the United States to other countries where stock options are welcome. Venture capitalists warn this will be yet another reason to incorporate new start-ups (and their jobs) outside the United States entirely.

How unfortunate that in the country that pioneered broad-based employee stock options — and where such options have benefited untold millions of individuals — the unregulated, unelected, unaccountable boys from FASB now stand ready to literally kill the goose long laying the golden eggs.

Unless the Senate can pull together behind S. 979 or S. 1890, both very reasonable compromises that call for full disclosure of all options, grants and other shareholder safeguards, the U.S. job-creation engine will take a crippling body blow.

We must act now to preserve this competitive incentive of employee ownership for all American workers. If the People’s Republic of China can attract more business, jobs and incentive with stock options, we hope American workers in the “land of the free” could also enjoy such incentives and opportunities.

George Allen is a Republican member of the U.S. Senate from Virginia and was Virginia’s governor 1994-1998. Gregory Slayton is the Managing Director of Slayton Capital, a private venture capital firm with offices in Silicon Valley and Tyson’s Corner, Va.

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