[trepanne]

> In aggregate, shareholders don't lose money.

Happily, the FASB isn't fooled by this particular sleight-of-hand. Not anymore, at any rate; they quit letting themselves get bamboozled by Silicon Valley flim-flam accounting for options more than 15 year ago.

If the shareholders have constant ongoing dilution due to continual share issuance, they have run just to stay in place. This is pretty straightforward, and what the GAAP are communicating to FS readers. You have a comp expense, of course (you gave something valuable to an employee instead of selling it for cash), and you also have the dilution, without even getting the cash in return. It's the only appropriate way to account for it.

It is a very expensive form of compensation.

[rsj_hn]

It is not flim-flam. The shareholders elect a board, and the board has to approve stock based compensation. The shareholders price shares based on this expected dilution so no one is being fooled and there is no sleight of hand. All of this is very public.

[trepanne]

The flim-flam comes when management argues that they don't need to book a compensation expense. Happily, though, this flaw in the GAAP has long since been cured.