Google stock option repricing

The WSJ picks up on the news and offers a perspective the post is behind a pay wall:. If the price drops, both suffer.

If Google is going to reprice when things go wrong, it should also limit the upside to employees. It would be easier simply to pay bonuses instead, tied to corporate performance, with a portion in stock that vests over time to aid retention … when shareholders do add up the cost of options, the answer can be shocking.

Update — more from Adam here. Google is transferring almost half a billion dollars in wealth from shareholders to employees, and for what ….?

Motivation and retention, says Google. Would someone please tell me where the average Google employee is going to go right now? In conclusion, and as the headline says, Google is in good shape.

But plenty damn good. Some of my friends who joined Google got both stock awards and stock options. I, with the help of one of my interns, looked at this type of blending, with another kind of blending where only the options are given but the strike price is lowered such as half of what the stock price on the day is.

The numbers of the options are appropriately adjusted to keep the cost to the employer the same. Note that a stock is also an option with a strike price of 0.

Google's move to reprice options picks up steam - SFGate

What we came up with that instead of granting these two types of stock based packages, a company would maximize the incentives for the employees if a single package of options with lowered strike price, such as half of the market price of the stock on the day, is granted. We assumed that the market value of the package is fixed.

My intern wrote a program to find the optimal tradeoff. Basically we define the incentive ratio of the package as follows. Assume that the stock price goes up by a dollar, then what is the increase in the personal wealth of the employee. We then take the average of this ratio over the life time of the stock based compensation package.

simyviqoj.web.fc2.com - Guide to Stock Option Repricing | simyviqoj.web.fc2.com

What Google is doing this quarter is a validation of our work. If Google had combined the stock with stock option the way, we showed is optimal, instead of the way it actually did, then Google would not be repricing the stock options today.

An expected gain of a 9 figure sum. Another thing on simulations the program showed is that with such a package, options is an effective incentive alignment tool for value companies too as it is for growth companies.

Google Reprices Million Employee Stock Options - The New York Times

The results were not mathematically proven, but were empirically based on the simulation of a computer program. The program was not tested so could have bugs too. It was written to give us some validation, because the math was too complicated complicated enough that we could not complete it. The results were not mathematically proven, but were empirically based on the simulations of a computer program. The number of Google shares subject to outstanding options will not change as a result of this employee-only option exchange.

These vesting periods range from six months to approximately five years. This modification charge will be recorded as additional stock based compensation beginning in the first quarter of As a result, this estimate is subject to change.

Generally, all Googlers with options are eligible to participate Eric Schmidt, Sergey Brin, and Larry Page do not hold options except where precluded by legal and tax issues in certain countries. We are working to address these issues and the final offer documentation will specify any countries in which we are not able to offer the program. Great quote by Eric Schmidt. You have to keep your employees happy to keep top talent. I think the re-pricing concept is silly, and think there are better ways to handle keeping folks incentivized after a share price drop.

Home Archives About John Four Letter Words RebelMouse. Thoughts on the intersection of search, media, technology, and more.

Searchblog on All Feeds. By jbat - January 23, Tweet.

The WSJ picks up on the news and offers a perspective the post is behind a pay wall: January 23, at 6: January 23, at 7: January 24, at 3: January 25, at 9: January 25, at January 26, at 6: January 27, at January 28, at 6: A Little About John John Battelle, 45, is an entrepreneur, journalist, professor, and author who has founded or co-founded scores of online, conference, magazine, and other media businesses.

Click here to read more about John. This work is licensed under a Creative Commons Attribution - NonCommercial- NoDerivs 2. Terms of Service and Privacy Policies.