That doesn't mean, however, that the decision shouldn't be revisited, according to Warfield. Options now are issued by companies that are far from start-ups; while no company is assured of success, more established firms don't carry the same risk as new ventures. "With options, managers only have upside risk," Warfield says.

"The idea of an alignment between managers and shareholders is a myth," Ketz says. Instead, the explosion in stock options seems to have driven an uptick in accounting fraud, as evidenced by the increase in financial statement restatements over the past 15 years. "Much of those have as their options this perverse incentive created by stock options." According to two reports by the Government Accountability Office, fewer than 1% of companies had to restate results in 1997. That number jumped to 6.8% in 2005. Between 1997 and September 2005, 1,929 companies had to restate results, according to the GAO's numbers.

Albert Meyer, founder and president of Bastiat Capital, long has been a critic of stock options. In a 2004 opinion piece in Barron's, he wrote, "Employee stock options are gradually being recognized as an investor's nightmare. After years of controversy, more people in the market now see that the granting of copious amounts of options to employees in lieu of cash compensation dilutes shareholder ownership."

Meyer's opinions don't appear to have changed. "Stock options are a massive wealth transfer from middle America's 401(k)s to the corporate elite," he said in a phone interview."It's a scandal."