Chambers lashes out at stock-option requirements

Requiring companies to expense employee stock options is likely to threaten a key form of compensation in high-tech companies and send jobs out of the U.S., Cisco President and CEO John Chambers said Tuesday in a keynote address at the NetWorld+Interop trade show in Las Vegas.

LAS VEGAS – Requiring companies to expense employee stock options is likely to threaten a key form of compensation in high-tech companies and send jobs out of the U.S., Cisco President and CEO John Chambers said Tuesday in a keynote address at the NetWorld+Interop trade show in Las Vegas.

“If you take away employee ownership, and you have engineers in another area around the world work for one-tenth the cost with a better infrastructure and better supportive government, how many people in this room don’t think that you’re going to see an exodus of jobs from this country?” Chambers asked a full house at the Las Vegas Convention Center.

The practice of compensating employees with stock options came under attack in the wake of accounting scandals last year. The International Accounting Standards Board last November put forth a proposal that would require companies to expense options. Cisco and many other IT vendors last year attacked the idea of such a requirement.

Chambers advocated some changes in stock-option practices, saying all stock option plans should be voted on, senior management should hold their shares for long periods and companies should disclose the impact on share value and reveal what percentage of shares go to the rank and file. However, he attacked the idea of requiring companies to account fully for the cost of stock options in the period in which they are awarded.

“What it could result in is literally an engineering and high-tech job export act of 2003,” Chambers said. And where engineers go, companies will follow, because most executives of high-tech companies come out of the engineering ranks, he added.

“Before we jump off this cliff, let’s understand and study the situation and not look back a decade from now and say, ‘How did this country lose that leadership and all the jobs that are involved?'” Chambers said.

The comments came near the end of a speech in which Chambers covered much familiar ground, enthusing over productivity gains that he said can come from companies using IP networks and aligning their business processes with the new technology.

To help create those productivity gains, Chambers advocated the Intelligent Information Network (IIN), a guiding concept for Cisco that the company pushed at its annual analyst conference last December. The IIN has advanced capabilities such as security and quality of service built in to the network infrastructure equipment, he said.

Packing a lot of advanced capabilities into the network itself could help administrators who are faced with making sure e-mail is working, viruses are stopped, servers are up and bandwidth isn’t “leaking” out of network connections, said Nader Hayek, a network operations technician for SBC Communications, who attended the keynote.

“You need intelligent systems to let you concentrate on the real-life issues,” such as training, network optimization and efficiency, Hayek said. Big-picture tasks, such as optimizing the network, call for the human skill of understanding emotions, he said.

“People might want one thing today and another tomorrow — literally, tomorrow,” Hayek said.