The Other Subsidy Enjoyed By Big Tech
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The COVID-19 pandemic and attempted government insurrections aside, headlines these days are dominated by how Big Tech’s growth has been subsidized by the section 230 exception of the Communications Decency Act.
And while section 230 protects websites from lawsuits in case a user posts something illegal, I want to focus on another concession enjoyed by Big Tech. It’s an arcane, but effective financial reporting rule that allows companies to under-report the true cost of compensating their workers.
So how is this possible? Tech companies rely on generous equity grants to attract and retain employees. Reporting rules allow these companies to expense the projected fair values of these shares and options on the date at which they’re granted.
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