Tuesday, October 07, 2008
The reprice debate will be next
As stock prices drop, tech firms who for years have relied on stock plans to keep top talent will be forced to look at repricing stock options given to employees. Wall Street hates this practice but the reality is that most of the major tech companies (like most other major companies) have seen stock prices hammered. For example Cisco is down 45%, Microsoft is off 38% and Google has lost 54%. These are actually some of the better performing stocks. There are stocks like VM Ware that are down over 80%. Pu another way an employee that joined Google two years ago and was given stock at a $500 a share vesting price is now considerably underwater when only month ago they were in good shape. To make matters worse these staff will have paid taxes on these stock grants that are now worthless. Of course keeping people in this kind of market is easier than it would normally be but the market will improve at some point and when it does many companies will have lost a key long term incentive with which to keep people if they don't look at repricing their stock grants to reflect the new reality of stock prices. Will the bad news ever end?