"Mr. Mahaney said stock-based compensation could “distort the quality” of a company’s earnings and “make them look stronger than they are.” -- this has been a refrain from analysts for years, and the whole reason companies now report options as an expense. The argument goes, if it doesn't "cost" anything to give someone an option, then for a salary budget of X and a revenue of Y you mis-report the cost of revenue so the revenue "looks better" than it really is. In my experience, anyone who has worked at a job where part of their compensation was stock options has never considered options "pay" like the dollars that show up in your paycheck twice a week. They are always lottery tickets, and given the trading restrictions at public companies, usually a pain to exercise or cash out. Further distancing them in one's mind from the notion of compensation. The second statement is this one;
"Ms. Hindlian says that while it can be reasonable for companies to pay workers a lot in stock, the practice can become scary when the stock starts to fall. “Particularly with software companies, you run the risk of losing your leading salespeople, engineers and developers when the stock falls, because employees feel like they’re getting a pay cut,” -- For the folks that I know, they don't consider it pay so if the options which they haven't exercised are underwater they don't consider them a "pay cut."
It is closer to the truth to say that options with value (so called "in the money") do have a retention power on employees but only if they continue to be worth something. And sometimes even that isn't enough.
But it is true to say that employees with options don't behave like little autonomous drone actors moving in collective self interest, and that makes it a lot harder to evaluate the enterprise value of a company. That difficulty arises from the understanding that it is the people that make the company what it is, and not being able to predict if those people will stay or leave adds uncertainty.
The desire for mathematical evaluation is strong in the analyst community and they continue to argue against anything that seems to affect that.