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China and Stock Options and Social Security

March 15, 2005 - 0 Comments

Yesterday, my boss, Laura Ipsen (VP of Worldwide Gov’t Affairs) presented a Cisco overview to a delegation from China. It is a basic history of where Cisco came from, what our innovation strategy is, and where we are going. She then talked a bit about our public policy philosophy which consists of 1) a strong education system; 2) robust communications infrastructure (i.e. “true” broadband); 3) supporting innovation and productivity enhancing systems and tools; and 4) a supportive government – which more often these days means a government that operates with a healthy dose of forbearance.

After her presentation, she was asked about why stock options were so important to the growth of a company. Without getting into the technical accounting arguments on the merits of whether they are an expense or not, she talked about how they infuse a sense of ownership in the employee population. There have been studies done that show that companies that give stock options to all employees are more productive than those companies that do not. A company of “owners”, she said, is more productive than a company of “renters.” Which made me think of the current debate on social security and the “ownership society.”

I’m not sure why stock options are not a part of this debate. After all, 14 million stock option holders have a stake in their companies (i.e. ownership) and this may be taken away rather than strengthened if stock options are made an expense. Shouldn’t stock options be a part of the “ownership society” and strengthened, not weakened? Just my .02.

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