Cisco: Stock Options Fuel IT Industry Growth

Cisco today defended employee stock option plans as a valuable incentive, saying it won’t follow Microsoft in abandoning the practice.

“Broad-based employee stock option plans are vital to the growth, innovation and the future of the technology industry and jobs in this country,” said Robyn Jenkins-Blum, a spokeswoman for the San Jose, Calif., network equipment giant.

In Cisco’s opinion, the plans are “the best way to align shareholder and employee goals, because employees benefit only when shareholder value is created,” she added.

Earlier this week, Microsoft said it would begin awarding stock outright to employees rather than grant options to purchase shares at a set price in the future.

The move was aimed at impoving morale at the Redmond, Wash., software giant, where the stock market slump has left employees holding reams of worthless options.

Analysts like the change, saying it provides a better balance of risk and reward for shareholders and employees and offers better clarity on expenses.

Cisco isn’t alone defending a system that enriched many high-tech workers during the late 1990s. Intel and Sun Microsystems say they won’t scrap their plans. IBM declined comment and Hewlett Packard didn’t return a call for comment.

Microsoft’s move shines a light on a simmering accounting debate. As part of the change, Microsoft will record the stock grants, as well as previously issued options, as costs — cutting into its bottom line. That method is gaining support amongst regulators and some prominent investors but is being resisted by many tech heavyweights.

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