As of June 2002, Intel's five most highly compensated officers held just 2 percent of outstanding options, reflecting the company's view that stock options are a powerful tool to motivate and retain employees at all levels.
The company said its goal is to keep dilution related to the option program to an average of less than 2 percent annually. The dilution percentage is calculated as the new option grants for the year, net of options forfeited by employees leaving the company, divided by the total outstanding shares at the beginning of the year.
These are some very interesting statistics here, and I honestly think Intel may have a legitimate point regarding options.
First, I think it's significant that only about 2% of the options are in the hands of senior management. I would like to see the percentage for other companies (especially those that have been at the heart of recent scandals).
Also, I think it's prudent to consider how many of these options will actually be exercised. Typically options have multi-year vesting periods and are issued at market value. In the heady 90's that meant that people could amass millions of dollars in options in five to eight years. Given the crash of the market back to 1997 levels, a LOT of options these days are going to be under-water given then were granted at the high valuations in 1998, 1999, and 2000. The market is even down from 2001. A LOT of these options are going to expire unused because I don't envision a lot of companies making it back to their mid 2000 valuations any time soon (if ever for some of them). I don't see any reasonable way to expense options which may or may not be exercised or worth anything three to seven years in the future. Furthermore, any time an individual leaves the company, their unvested options are forfeited (and any vested options they do not exercise). Is this income??? If you've already expensed the options, then you have to put forfeited options somewhere as a net "income". That strikes me as an even greater nightmare... |
