Silicon Valley Loses the Keystone of a Golden Age

But pleas like this are increasingly futile -- and lonely, given the growing conviction among investors and accountants that options exact a high cost and should be accounted for in income statements. In part, the more critical attitude toward options follows a spate of scandals at the likes of Tyco, Qwest and Enron, where executives cashed in outsized options grants while presiding over ultra-aggressive or outright fraudulent accounting.

Yet the early evidence suggests that the main upshot of options reform will not be dramatically diminished profitability for technology companies or more modest pay packages for executives. Rather, the biggest effect is likely to be the winding-down of a historic populist tradition in which tech companies have shared the wealth with workers at all levels.

"I think it's absolutely certain that if the FASB proposal takes effect, we will see a dramatic and sustained decrease in the number of options granted to rank-and-file employees," said Rick White, CEO of Technet, a public policy organization for tech companies that has lobbied vigorously against the measure.

To be certain, technology profits are bound to take a hit after the accounting shift is adopted. At firms with especially generous policies, options can mean the difference between a profit and a loss. Sun Microsystems(SUNW Quote), mired in red ink for two years in a row, granted options valued at just over a half-billion dollars in fiscal 2003 -- a sum equivalent to nearly 5% of its annual revenue that year.

Factoring in the cost of Sun's options program would push out the company's profitability (now expected in 2005) by a year or more, estimated Merrill Lynch analyst Steve Milunovich.