Warren Buffett [op-ed, July 6] thinks it is acceptable to expense stock options for the top five executives of a company in the same manner as all other employees. His premise is that "every other item of value given to employees is recorded as an expense" and that options should be no different.

That logic ignores the fact that option grants have no cash value to an employee until the employee exercises the option many years later. Often, the right to exercise the option expires or, in the case of termination, is canceled.

Mr. Buffett also ignores the fact that options are treated differently by employees and upper management because of issues of projected tenure, financial need and ability to convert an option to actual stock, which is then held for its growth potential.

The variability and uncertainty regarding the status of any granted option is especially acute among employees not in the top-five group. Such variability makes expensing options difficult.

Mr. Buffett argued that estimation of an option's value is proper because estimating tangible property value is practiced via depreciation schedules for software, equipment, trips to Hawaii, etc. But if corporations are required to expense all option grants, then, according to the historical practices of our tax code, any employee receiving the option must pay income tax on it.

What if the employee leaves the company and never actually exercises the option? Does Mr. Buffett intend to have the Treasury create a new unfunded budget item des- ignated to refund taxes paid on options?

I don't like Congress trying to figure out the details any more than Mr. Buffett does. However, I'd rather see things stay as they are than see his tortuous logic guide us.

DAVID J. BEERS

Bethesda

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Warren Buffett's description of stock options doesn't hold water.

Options are not part of a salary; they are an investment -- often a risky investment -- in a company. Options are no different from any other capital contribution and should be treated the same way.

That's why small businesses call employee stock options "sweat equity." I am chief executive of a private technology company in Boston. My employees, as in the case of most start-ups, are paid less cash than at larger companies, but they receive options to purchase company stock -- the classic entrepreneur's bet.

Our investors are happy to trade a share in the company for a motivated and inspired workforce. It is no accident that the National Venture Capitalists Association disagrees with Mr. Buffett too.

Building a business takes years and is fraught with risk. Accounting rules that make it unnecessarily expensive for companies to attract investment -- including investment by employees -- will suppress business development, reduce economic growth and destroy jobs. It's that simple.

MORRIS PANNER

Chevy Chase