Buffett on stock options as compensation · Transcript · BuffettMungerGPT

WarrenWe say that the cost to the shareholder of issuing the options is about what could be received if they sold, turn those options into warrants and sold them public or sold them as options. And that's the cost. I mean, it's a compensation cost. And just try going to a company that's had a lot of options, grants every year, and tell them you're going to quit giving the options and pay people the same amount of money. They'll say, you took away part of my earnings. And we say, if you've taken away part of the earnings, then let's show it in the industry. it in the income account and show it as a cost because it is a cost. And I think actually a number of auditors agreed to that position many years ago, and they started receiving pressure from their clients who said, gee, that, you know, that might hurt our earnings if we reported that cost. And the auditors caved, and they put pressure on Congress when it came up a few years ago, and I think it's a scandal, but it's happened. I go so far as to say it's fundamentally wrong not to have rational, honest accounting in big American corporations. And it's very important not to let little corruptions start because they become big corruptions, and then you have vested interests that fight to perpetuate them. Surely there are a lot of wonderful companies that issue stock options and that the stock options go to a lot of wonderful companies. go to a lot of wonderful employees that are really earning them. But all that said, the accounting in America is corrupt, and it is not a good idea to have corrupt accounting.