Stock Options Create Jobs
By: Congressman Lamar Smith
Last week the House passed legislation that allows American small businesses to continue to offer stock options to millions of employees. It is vital that we preserve incentives to promote stock ownership for workers as we try to fulfill President Bush's goal of creating an 'ownership society.'
Numerous high-tech companies in Texas offer stock options to attract the best and the brightest employees. Options have become a vital tool used to attract educated and highly-skilled employees to companies both in Texas and elsewhere.
What makes this benefit so attractive for employees is that these plans typically allow employees to purchase stock in their company at a discount. Options can be especially useful to cash constrained start up companies that cannot pay competitive salaries. More than 2,400 employers currently offer these plans to almost 16 million workers in America.
Stock options provide everyday Americans with the incentive to work hard to expand their companies and contribute to the American economy. But recently proposed federal regulations would require companies to expense stock purchased by employees. If implemented, these rules would have grave consequences for rank-and-file workers.
Stock options cannot be valued accurately enough to be included on the income statement. Furthermore, the difficulty in judging the present value of stock options complicates the decision made by potential investors.
There is no question that the granting of stock options to a broad base of employees has been and remains a very strong component of job creation within our economy. To force companies to deduct the cost of all employee stock options from their profits would defeat the very purpose of offering them, and it's difficult to imagine why or how many companies would continue to do so.
They either wouldn't, or else they would simply hire fewer workers. And that is not a good 'option.'
It would be a huge mistake to discourage companies from offering stock options just as many of our international competitors are increasing the use of stock options to gain a competitive advantage.
Broad-based employee stock option plans give employees at all levels a chance to own part of a company. This in turn fuels innovation and the entrepreneurial spirit and increases productivity since employees feel as though they have a vested interest in the success of their company.