GMP Capital Trust looking at its stock options - 16 Apr 2009

GMP Capital Trust is asking shareholders to approve the repricing of
a slew of stock options to some executives and insiders, arguing its
unit price has been punished to the point at which the options are no
longer providing incentives for managers to stick around and rev up the
value of the company.

The proposal highlights the delicate
balancing act many companies may face now as options priced in bygone
days verge on expiring worthless while stock prices languish in the
wake of the global financial and economic meltdown.

GMP's units
have slid 50% from this time last year to $8.51. The Toronto Stock
Exchange's financial services index has sunk 27% over the same period.

Options
are usually part of executive compensation packages, and allow the
holders to buy stock at a fixed price after a set vesting date.

Options
are designed to give management incentive to get -- and keep -- the
stock price up, which benefits all shareholders. But as stock prices
drop, the prospect of employees being able to cash in on outstanding
options dwindle.

"The current [option] plan is not achieving
its stated purpose," said Rocco Colella, director of investor relations
at Toronto-based GMP. "With any investment bank, your relationships and
your people are your strongest asset.... The options above $19.44 just
didn't have the retention factor that the revised plan would have."

The
proposed re-pricing is to be part of an option exchange, in which
option holders can trade in 2.66 options that carry exercise prices
above $19.44 for a new option with a strike price reflecting the
closing price on the day the company converts its trust units to common
shares, expected in mid-May, according to GMP's management information
circular released Monday.

The GMP re-pricing proposal affects 47%, or 2,114,125, of GMP's outstanding options.

"The
board's feeling and management's feeling is the revised exchange would
allow for greater retention with very incremental cost to GMP and
ultimately to the unit holders," Mr. Colella said.

GMP Capital Trust looking at its stock options

Carrie Tait and Barbara Shecter,
Financial Post 


Published: Thursday, April 16, 2009

John Aiken, a
financial services analyst at Dundee Securities, said firms such as GMP
need to keep "the rainmakers on board to get back up to the lofty
valuations."

But the Canadian Coalition for Good Governance,
which represents many of Canada's biggest money managers, staunchly
opposes the re-pricing of options.

"If there is a significant
sustained drop in the company's share price, the board should not
directly or indirectly 're-price' stock options on the theory that this
is needed to retain executives," Stephen Griggs, managing director of
the coalition of money managers, said Thursday. "Option exercise prices
are not increased when share prices rise, and they should not be
reduced when share prices drop -- this is the cost of the use of stock
based pay for performance," he said.

Mr. Griggs said there could
be "rare" situations in which it makes sense to re-price and some U.S.
firms have recently re-priced for some non-executives in order to
retain key operational staff.

"If there is a real risk that key non-replaceable staff would leave without it,

More option repricing discussions.

Posted by Dan Walter

Performensation: Equity Compensation for High Performance Companies.