Stock Option Tricks

from the repricing,-trade-ins,-and-other-ways-to-screw-your-shareholders dept

I’ve never been a big fan of repricing stock options. I understand why companies do it, but I think it defeats the point and damages legitimate shareholders’ interests. The original point of stock options were that they were supposed to incent employees to work to make the company’s stock price rise. If that doesn’t work, and the company’s reprice their options, where’s the incentive? Regular shareholders don’t get to reprice the stock that they bought when it goes below the price they paid. They took a risk, and they lost. They knew that going in – as should employees who accept stock options for compensation. Nowadays, though, companies are increasingly experimenting with plans to allow workers to trade in their stock options for new in-the-money options. There’s a waiting period of six months between turning in your old options and getting your new ones – and if you get laid off or leave during those six months, too bad. You also might have to start vesting all over again, which isn’t so great. In fact, sometimes it might not make sense to accept the trade-in. Also, it’s a bit questionable that top execs are allowed to participate. While you might (if you tried really really hard) be able to convince me that it’s okay for rank-and-file employees to get new options, since they had little to no control over the stock price, top executives don’t have that excuse.

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