Underwater Stock Options Get a Lifeline From Firms

WP ^ | 03/07/09 | Tomoeh Murakami Tse

[TigerLikesRooster]

Underwater Stock Options Get a Lifeline From Firms

By Tomoeh Murakami Tse

Washington Post Staff Writer

Saturday, March 7, 2009; D01

Nearly 100 companies have undertaken programs that allow employees, many of them executives, to exchange sharply depreciated stock options for new awards with more generous terms.

The companies, from Google to Silver Spring-based United Therapeutics, argue that the exchange -- which increases the chances that executives will be able to collect rewards even though the company stock has plummeted -- is necessary to retain and motivate personnel.

Critics say the practice undermines the purpose of performance-based bonuses and puts the company's executives and workers on a different plane from ordinary shareholders who have no choice but to hold on to battered stocks or sell them at a loss.

"It goes to a sense of entitlement, which I think is misplaced," said Con Hitchcock, a lawyer who advises activist investors on corporate governance. "There are a lot of people other than executives who could use good-performing stock in their portfolio."

[TigerLikesRooster]

Stock price collapses, but stock option lives.

[TigerLikesRooster]

Ping!

[Cindy]

http://www.freerepublic.com/focus/chat/2136635/posts

“Are you looking for a job?”

Note: This thread is updated on a regular basis.

[Son House]

is necessary to retain and motivate personnel.

Money, evil money. Why is Øbama handing out so much money if it is so evil? Retain and motivate personnel?

[Mister Da]

There is something weird here - it seems to defy logic to me:

Companies are failing because of the actions of management. Yet they are offering more incentives to keep these people, fearing they might leave for a better offer.

Uh, we are in a recession, bordering on a depression. Unemployment is increasing as companies fail &/or cut employees. The job market for overpaid failures is shrinking every day.

Who, beyond the Obama admin., are gonna be stealing away these champions of profit & solvency.

I'll bet the job offers are just poring in to the CEOs & upper mgmt. of GM, Chrysler, CITI, AIG, banks, mortgage companies, etc. NOT!!!

“I see on your resume here Mr. Applicant, that you nearly bankrupted the company you previously ran, & it is now 40% owned by the gov’t. You're hired - you're just the guy we need! I'm sure the stockholders will be thrilled you are our new CEO.” - only in bizarro world, which is the direction we seem to be heading.

[Plumres]

I am just a regular employee at a large bank. They gave 4 sets of stock options to every employee over the last decade. I was smart enough to cash in 3 of my options and make about $4000 doing it. I cashed in a total of 450 stock options. I still have 150 stock options that are hopelessly under water. Some in my group have not cashed any options and they now hold 600 shares of options that are hopelessly under water.

Just telling you this because not all options have gone to the big wigs in companies. Some are held by $20,000 a year clerks.

[Mister Da]

I am well aware of the incentives given to “regular employees”, having been one most of my adult life & having received various stock incentives myself. I have no problem with that, especially when the company is making a healthy profit.

My comments were directed at over incentivized, under performing (often unethical) executives, whose real incentive should be that they still have a job in an economy where failures SHOULD have a tough time finding another job of equal or greater pay & incentives.

[aculeus]

Accounting question: do the companies that reduced earnings for options when they were granted reverse those charges now that the options are known to be absolutely worthless?

Anyone?

That rule change and “mark to market” are the profession’s disgrace.

[M Kehoe]

Accounting question: do the companies that reduced earnings for options when they were granted reverse those charges now that the options are known to be absolutely worthless?

NO. Go figure.

[M Kehoe]

OK, where did my tagline go?

5.56mm