First off, let me state that I am not defending Tom Siebel, or Larry E, or the others whose obscene wealth mocks the true working man (he said piously). However, I will side with defending the current stock option economics.
In today's world, the center of technological innovation is Silicon Valley. There are a lot of reasons for it: historical luck, good weather, conduit to foreign brain power, diverse and tolerant community, center of the VC world, etc. However, a major component is the success is the 'rainbow' principle.
Most SV startups go through a very specific early company lifecycle. Someone gets a good idea, tosses it around with a couple of others, and they decide to start a company. They build a business plan, and approach VCs for funding. VCs pick the best, nuture them through the early 'innovation' days, and birth them into the business world with an IPO. At that point, company stretches wings, and either flies on its own or smacks into the ground. Darwin's law applies admirably.
One of the key components of this life cycle is stock options. Stock options are the 'golden ticket' that provides a young company with (at the time) cheap motivational currency to spur the early growth. Do not be mistaken; the power of stock options in the right hands is a near miracle productivity tool. Having been through 20 years of startups, I can tell you that people will pert near kill themselves for something that has little or no present value, and unknown future value. We're no talking 60, 70, 80 hour weeks, we're talking TOTAL commitment of waking hours. Friends and family are gently nudged to the side for vast periods of time for the good of the company.
During this period, people and companies can perform miracles. You would be amazed at the effect; not only will people work tremendous hours, but will also (usually) put aside the usual petty differences that seem to rule our daily lives. Everyone is focused on one goal: making the company successful. The more work put in, the more dedicated people become, as they don't want to see previous hard work wasted.
It is a formula that has proven to be one of the most powerful in business. It is a tool that must remain available for the US to continue to lead in innovation. Why do you think that the US continues to dominate in areas of new technology? Because we're smarter than everyone else? No, it's because we steal their best minds into our startups, with the dream of fame fueled by, yes, stock options.
To dull this tool, IMHO, would have a grave impact on our ability to maintain the crown of technological innovation. The effect would be far reaching and irreversable; once a mind/innovation magnet like SV is broken, it will be impossible to recreate.
I do agree that there should be some limit at the top. The amounts made by some of these billionaires is obscene. When I think of how stock options DONT work, I visualize people like Larry Ellison.
I would suggest two things:
1) Make companies count stock options as an expense only for non-founding stock granted to a certain level employee and above: officers, maybe vps, etc. This is where most of the abuse occurs.
2) Eliminate the AMT. It hurts the rank and file employees and serves only to stiffle the positive effects of stock options. |
