Granting options is fine, but not at the 'stumble price.'
Granting options at a price lowered in part due to the company's own stumbling, would be an ironic way to reward a company for their own stumble, that's incongruent to investors.
Even Intel's own employees that own a substantial amount of Intc stock (so they think like investors), do not want to see more at any lowered price due Intel's own stumbling. They would rather see the compensation aligned to make the stock go up, not an incentive program that encourages their colleagues to stumble and grab more options at the stumble price. They are annoyed at the thought of more options going out at the lowered 'stumble price.' They want Intel's board to get tough on this, not be easy. You motivate talented people by being tough, not being easy. They appreciate the options they have been given, especially the add-ons they feel were valid to hand out over the past few years due to their hard work resulting in successes even in the face of hard economic conditions, but they do not feel more options is an appropriate reward after a stumble, because it would signal to executives it's okay to stumble. They do not want executives to think it's okay to stumble. They don't want Intel's board to make it financially gainful for their colleagues to stumble but that's what Intel's board would be doing if it grants more options to Paul at this lowered stumble price. They want Paul to be fiercely motivated to make sure other executives don't stumble. They don't want to see any softness in the approach of compensation, which is what they perceive granting Paul more options at a stumble price is. No one has any issue with granting more options, but not at the stumble price, because that sends the wrong message.
I'll pipe in with my own observations:
- granting more options is fine, but since Intc is perceived to be at a stumble price, raise the grant price so it doesn't reward stumbling and doesn't encourage stumbling for a gain, but instead rewards for a good job.
- given the company's stock is perceived to be at a 'stumble price', use more cash rather than options because cash is well-defined and doesn't reward for stumbling/recovering from a stumble.
Lastly, I've noticed more than a dozen Intel people demonstrate a lack of appreciation over options. (They are wrong of course, considering how the stock has more potential at $23 than it did back at $65. The PEG is nearly one folks - I would bet that's almost in even GV Tucker's bargain price range. Yeesh.) As an investor, when people stop showing adequate appreciation for options I say stop the options for a now if they aren't going to appreciate them. Additionally, when asked, all twelve said they would rather have more cash than more options. (Go figure.) I think people are having cash flow concerns after half a decade of bad stock performance - esp those with families. This could mean it'll be easier for startups to start snagging good people away from large companies at the end of the year with cash, if people remain focused on cash. If cash is cheaper given Intc is so low, use cash instead for now.
I would articulate their concern about Paul's additional grants as follows: they want to see Paul fiercely motivated to make sure all execs perform well so everyone brings the stock to $40, not just bounce it back to $30. They own so much Intc, they don't want to see rewards go out for stumbling and bouncing it around. Basically, their issue is only the grant price.
I think a grant price of $28 implies Paul would fiercely motivate other execs to make the stock go above $30, not just bounce it back to $30. Demanding investors.
Regards,
Amy J |
