DW - Blog entry from Frank Roche - Looks like there will more to follow

Learning to Swim Underwater: Employee Stock Options and the Tough Economy

http://www.knowhr.com/blog/2009/01/05/learning-to-swim-underwater-employee-stock-options-and-the-tough-economy/

Do
you remember the first time you swam underwater? Did you hold your
nose? Squeeze your eyes shut? Take a big gulp of air and dunk your
head? Pop up in a second gasping, thinking you’d been under for a whole
minute? Well, hold your breath a little longer. A lot longer. You’re
going to be underwater for a year.

The tidal wave came in as the value of stocks declined. Employee
stock options have been deluged. They’re underwater — that is, the
grant price of their shares is higher than the current stock price. In
fact, Silicon Valley Reporter
says “more than 80% of Silicon Valley’s 150 largest publicly traded
companies have employees holding underwater options.” And it’s not just
tech companies. CFO Magazine reports
that “close to 100 percent of Fortune 500 CEOs’ stock options are
underwater” as of the first of the year. That means millions of
employee options are underwater, too.

It’s getting worse. Heck, more than one-third of Google employees have underwater options. The S&P 500 had its worst year since 1937, down over 38%. And 2009 doesn’t look like it’s going to be any better. We’re in a deep recession and the water is rising higher above the price of employee stock options.

Yet, with all the tumult and economic strife, we need good employees
to stay. We need them to focus on profitability. And we need their
attention. One big element: Stock option repricing. That gets their
head above water.

A number of companies are repricing their employee stock options
— and many more will in 2009-2010. Repricing or exchanging underwater
employee stock options isn’t easy. Companies rely on experts to help
with the technical details.
And gaining shareholder support is no small feat. But once an
acceptable structure is worked out, how do you communicate the exchange
to employees?

At the start of an exchange, you have to ask for options back in
exchange for new ones. Often, that means exchanging a bunch of options
for far fewer. Employees are skeptical. There are exchange ratios.
Official Tender Offer documents. A limited time to make crucial
decisions. Employees want to know what’s up.

Coming Next: Developing a Communication Strategy for Underwater Stock Options