Policy Areas: Stock Options

One of the most important ways that entrepreneurial start-ups can compete with larger businesses for top talent is through employee stock options. Stock options essentially offer employees a partnership in the company and give them a stake in the company’s future. By replacing a portion of salary with stock options, an incentive is created for increased productivity, providing a return both for the employee and the stockholders. This allows the entrepreneur to divert important start-up capital from salary into stock options, maximizing available capital during the all-important first steps. However, corporate accounting scandals have accelerated plans to require stock options be treated as an expense, resulting in drastic cuts in reported profits for those companies who utilize them heavily.

Issues include:

• Expensing (voluntary/mandatory)

• Option Repricing

• Options Overhang

• 401(k)

• Capital Gains

• FEC

• Financial Accounting Standards Board

• Taxation

• Corporate Reporting

• Financial Disclosures

• Employee Stock Ownership Plans

• Employee Retirement Income Security Act

• Corporate Compensation

• Alternative Minimum Tax 

CRS Issue Brief for Congress

• Firms That Incorporate Abroad for Tax Purposes: Corporate "Inversions" and "Expatriation"
  by David L. Brumbaugh, Congressional Research Service

• Employer Stock in Retirement Plans: Investment Risk and Retirement Security
  by Patrick J. Purcell, Congressional Research Service

• Accounting Reform After Enron: Issues in the 108th Congress
  by Mark Jickling, Congressional Research Service

Articles & Reports

• The Economic and Legal Consequences of Requiring the Expensing of Employee Stock Options Without Specifying the Valuation Method

• Employee Stock Options -- Their Use and Policy Implications

:: View all articles ::

Useful Resources

• Citizen Works - Articles on CEO Pay and Stock Options

• National Center for Employee Ownership - Stock Options

:: View all resources ::

POLICY AREAS

E-Commerce

Entrepreneurship Education

Financing

Intellectual Property

Minorities

Regulatory Burdens

Stock Options

Tax System

Technology Transfer

Women

Worker Benefits

Workforce Training