Stock Options: Weighing the Impact of Bailouts

Muller, Jennifer S.; Blatnicky, Lucia
January 2004
Financial Executive;Jan/Feb2004, Vol. 20 Issue 1, p38
Academic Journal
In this article the author reports on the results of a study conducted by Houlihan Lockey Howard & Zukin that examined how companies are dealing with the issues of stock options repricing in the wake of corporate scandals and reductions of equity prices. The author notes that these events have caused investors to lack tolerance for companies that chose to compensate employees in the face of significant stock losses. The author discusses four of the most common approaches that companies have used, as alternatives to repricing, to bail out failing options which include cancelling the options and replacing them six months and a day later, replacing options with restricted stock, shortening the period of time before the next option grant cycle and buying the options with cash.


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