There needs to be a check-and-balance scheme with options. Maybe requiring the boards of directors to purchase stock at current price when options are granted to managers. That way, if stock appreciates, managers gain with their options as do BODs, but if stock falls and management just shrugs or tries repricing their options, then at least BOD's suffer along with stockholders. That'd be an incentive for BODs to align themselves with ordinary stockholders and maybe not rubberstamp management's options.
I'm against options in general. Management should be paid well enough with salary and other perks to be "incentivized". There are just too many abuses coming to light with options - not just the repricing thing. For example, many managements say that stock price is uncontrollable by them, they should base options grants not on stock performance but on management measures such as roe or sales growth or something like that. What happens is that managements then favor that measure over all others. For example, if it's sales growth, then the temptation is to make sales regardless of profit. Who gets grants, how much, for what reason -- it's all a murky area, imo, much subject to machinations among insiders - directors and managers.
Also, if I'm a long-term investor in a company, then the granting of options that commonly vest upon sale of the company gives the possibly unintended consequence of managers seeking to sell the company, a company I would be hoping to continue to be a stockholder in.
If options are given primarily to keep talented managers from leaving, then I say phooey. Pay them enough in salary or let 'em leave. Talent - leadership ability - is much more broadly distributed in the population than corporate leaders would have us believe. People are replaceable - as we will be seeing with the options abusers who are exiting. The companies will still survive. |
