One message from last year’s election is that American workers are discouraged and angry that the “system” is not working for them. The standard of living for low- and middle-income Americans is not keeping pace with historical growth. Worse, there seems to be a widening income gap between average workers and corporate executives whose income is increased by stock options and other benefits available to them.

Many people see this as a lack of respect for the contributions of the average worker. An important first step in turning around this perception would be to develop an affordable way for corporations to provide stock options to all employees. That wouldn’t solve income inequality, but it would help.

Stock options weren’t always reserved for those at the top of the corporate ladder. It used to be rather normal for employees to have the option of purchasing shares in the company for which they were working. But in 2006 the Financial Accounting Standards Board issued a rule called FAS 123, which requires companies to account for stock options as if they were a cash expense, therefore reducing the net income of the company. FAS 123 also requires stock options to be recognized as more shares outstanding, thus diluting share values for the company’s existing stockholders. This double cost became so expensive that nearly all corporations eliminated stock options for employees making less than $100,000 a year.

 

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