Why do you consider it okay that Castellini can exercise his Nov. 1999 options at the Nov. market price rather than at $44 or$50? These options run for 10 years and even with the abysmal performance of BD stock it should over a decade double- why not have his exercise price at $44 or$50,the range the stock traded in in 1998 before credibility problems were caused with Wall Street ?
I did not make myself clear. Option strike price is set at market on the day of the grant to comply with the IRS. For BDX to double within 10 years would require an annual compound growth rate of 7.1% which based on past performance and the forseeable future is doubtful. The bigger question is why has Castellini decided to remain as Chairman, when he was to have "retired"? Remember that he had retired in the past, but only returned after a few weeks because Gilmartin left with only two to three weeks notice to take the Merck Chairmanship. Gilmartin needed an insider to succeed him, in order not to make it look like he left BD high and dry. Gilmartin had just restructed the company and he left. Castellini took over and changed the structure again. Just look at the old annual reports and you will see what I mean. Ludwig has a hugh hole to climb out from. Time will tell if he can do it. I am still betting that after two years they will try to sell BDX in order to recover a quick premium on their options. The big boys , and management, have lost significant amounts on the worth of their options. They will look for the quick fix, which means to sell the company
There is no IRS requirement that the option exercise price has to be the market value on the day of grant. The only tax requirement is that incentive options (which the Castellini options are not ) must have an exercise price at least equal to market value.All options, incentive and nonqualified, can be granted with an exercise price higher than current market value. This however is not the point to quibble about. The outrage is the fact that Castellini was granted 100,000 shares in Nov. at all. Grants are made once annually and he had already gotten a grant of 195,000 shares in Jan. As said earlier and your message agrees withs this, why is he staying as Chairman? From a substantive as well as a cosmetic standpoint,this is a major negative for BD and is one of the points that should be made by shareholders at the Feb. 8th annual meeting.