The U.S. stock market has now lost over 40% of its value since its peak in 2007, wiping out trillions of dollars in shareholder wealth. Certain industries, like financial services and housing, have been hit even harder. Most executives and many employees now face the unpleasant fact that their stock options are underwater, and want their employers to fix the problem by repricing them. Before acting, management and Boards should carefully consider the pros and cons of an option repricing and make informed decisions about their option programs.
Reasons Not To Reprice
There are a number of reasons why companies should not reprice options, including: Read more…
Long-Term Incentives
What’s News is a regularly updated summary of news stories, typically related to compensation, that we are following, find interesting, or find baffling.
Week of March 16th…
Lost this week among all of the AIG bonus calamity (our thoughts to come on this shortly) were a number of companies seeking shareholder approval for option exchanges:
- Google announced that approximately 93% of its underwater options granted to employees will be exchanged on a one-to-one basis. Employees typically receive fewer number of options when they surrender their underwater options because they are trading in something they view as worthless for something of value, which is why many feel Google’s one-to-one exchange is quite a generous move.
Common arguments that companies use when requesting option-exchange programs from shareholders include:
Read more…
Long-Term Incentives, Shareholder Issues, What's News
Newsletter: Our Winter 2009 newsletter is out and available for download on our website here. This quarter we’ve dedicated the newsletter primarily to stock option repricings, a topic that has come charging back into the compensation world after a near decade hiatus.
White Papers: We’ve also recently published a white paper, “The Trouble With Options”, that discusses the fundamental disconnect stock options create between executive behavior and shareholder value creation. World@Work subscribers can read an abstract on the World@Work website here. Alternatively, the full paper is available here on our website.
Suggested Reading:
James Surowiecki wrote an interesting article for the New Yorker that discusses, among other things, ’sticky wages’, ‘talent hoarding’, and the productivity of the labor force.
Meanwhile, while the average hourly wage of employees increased by about 3% last year, Merrill Lynch, a company that shed nearly 80% of its shareholder’s value, managed to find a way to pay $209 million to ten of its highest paid employees. You can find details in the Wall Street Journal (subscription) or the New York Times.
And finally, the New York Times has an interactive chart that outlines the gaps that continue to exist between women and men in the same job across a number of occupations.
Exec Pay, Long-Term Incentives
Add new tag, Employee Pay, Exec Pay, Shareholder Issues
