Buffett and Munger on expensing stock options · Transcript · BuffettMungerGPT

CharlieWell, the argument that is made when people issue options is doing more for the company than giving people cash compensation. Maybe more convenient to cash compensation, too, for young and upcoming companies. But the fact that you are doing something in terms of paying people in a way that you say is even more effective than paying them in cash to say that, therefore, you shouldn't have to record the payment, I've never really followed it. I don't have any objection to options under some conditions. I've never taken a blanket position that options are sinful or anything of the sort. I just say they are an expense. And to be truthful with people about what you're earning, you should record the expense. And if a company can't afford to be truthful, I have trouble with that. And I think all of the opposition at bottom to the expensing of options comes from people who know they're not going to get as much. many options if they're expensed and they, you know, they would like cash not to be expensed, but they can't get away with that. You know, I mean, if you had, if you had an accounting rule that said the CEO's salary should not be counted in cash, believe me, the CEOs would be in their fighting to have that rule maintained. I'm not at all against stock options in venture capital, for instance, but the argument that prominent venture capitalists have made that not a expensing stock options is appropriate because if you expense them, it would be counting the stock options double. That's an insane argument. The stock option is both an expense and a delusion, and both factors should be taken into account in proper accounting. John Doer, the venture capitalist, as he argues to the contrary, is taking a public position that were it offered to me as part of my employment. I would rather make my living playing a piano and a whorehouse. We always get to the good stuff in the afternoon. I hope the children are in bed.