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Technology Stocks : All About Sun Microsystems
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To: Charles Tutt who wrote (50675)7/25/2002 2:25:42 PM
From: E_K_S  Read Replies (1) of 64865
 
Hi Charles - It's quite simple. Have the company work with our favorite investment bankers and provide options bought in the open market from the CBOE. An employee package can be structured with staggard periods and strike prices. Two year leaps are now available but if there is enough interest in three, four or five year leaps, I am sure the investment bankers will create a market. The company would expense the actual cost of the out of the money option(s) at the time they are issued. When exercised, the company would transfer the stock to the investment banker. The company would have to maintain employee shares set aside from time to time as a balance sheet item. When transferred, the appropriate accounting entry adjusts the accrued balance of held employee shares to reflect the actual assets (and value) held in the account.

As far as taxes, the company can provide with the package some cash (like a bonus) that would cover the up front liability.

The employee would be issued options that can be traded any time on the open market for cash.

The reason for all option incentive programs is to make the employee feel they are participating in the success of the company. Management must provide these types of incentives down to the lowest level employee not just VP's.

An alternative to all of this is to implement a standard profit sharing program which if approved by the shareholders provides a certain percentage of quarterly profits (usually 10%-15%) to be distributed among all employees. The formula for distribution is usually based on their current wage and on average works out to be equivalent to one to two weeks pay for a middle manager.

EKS
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