NEW YORK (Reuters) - Intel Corp (NasdaqGS:INTC - News) is seeking permission from its shareholders to exchange worthless employee stock options, a controversial move that the world's biggest chip maker says is needed to retain critical staff.
Under the plan, which is open to all employees excluding senior executives, Intel would exchange underwater stock options -- whose exercise prices are above the current stock price -- for ones carrying carry a lower exercise price.
99% of the stockholders on this board with either not vote, laziness, or you have no clue how to vote your proxy. I would say 50% have no clue what a proxy vote is.
Ignorance is a sad thing when it comes to investing. That is why this country is in the mess it is today. You all want to make $$$ and don't care how the company does it. As long as you don't lose any money, they can do whatever they want.
Intel is ONE of the ONLY companies that discloses everything about options, pricing, awards. This is cost the company nothing. It has already been accounted for due to the stupid accounting rules regarding options.
exchange is with lesser amount of shares which will equal same cost basis as original options so this is not costing intel anything, a small cost to retain and motivate top talent without rewarding CEO...
First, the type of true "top talent" a company wants to keep will deliver because they are innately driven to excellence - not because the momentary value of their stock options.
Second, if employee's options are repriced in-the-money where's the incentive for employees to get shareholder's shares in-the-money? Employees can cash out their repriced vested options and walk.
Third, Intel keeps saying this is their plan for keeping "top talent" but its not limited to the best performing employees, its applied to every one of the 84,000 across the globe.
Options are a useful tool but employees need to be in sync with the company's shareholder-owners and the best way to do that is for employee's shares to be the same as every other shareholder.
Chairman Craig Barrett's perspective seems out of step with shareholder sentiment. Ironic he made this comment on a wireless panel after Intel just took an impairment of around $1 billion dollars of shareholder value because of Intel's investment in Clearwire. Who were the key employees responsible for this, and why would shareholders want to keep them?
"Chairman Craig Barrett told Reuters he anticipates Intel shareholders will see the big picture, and the value of retaining key employees, particularly in troubled economic times.
"I don't think there'll be shareholder backlash," he said in an interview on the sidelines of a panel on wireless technology's role in health care in Washington D.C.
Number 1: The graveyards are full of indispensable people. Somehow the world still revolves without them. If "key" people are working there only for the money, then let them go.
Number 2: The stock options are a risk and not a given reward. What's the point of giving them out at a strike price if the reward is guaranteed by lowering that price. If there's no limit to reward when given out; there should be no limit to risk from their total loss.
A stock option plan can actually encourage key employees to quit, producing the opposite outcome Intel cites as the reason to reprice its options.
During the rapid growth '90's it was pretty well known that employee stock options created a lot of employee millionaires. The general rule was that one out of five Microsoft employees and one out of 7 Intel employees were working millionaires and even multi-millionaires.
In this environment a company develops an atmosphere were employees say "hey, I don't really need to be here" and pretty soon it becomes common knowledge which one's could afford to walk whenever they want.
Many of the best and brightest quit and use their option profit to become entrepreneurs.
However the vast majority of employees become victims of the "golden handcuffs" and they will do anything to stay just to allow their in-the-money options to mature. These people rarely challenge the status-quo or develop anything new, instead they become part of the corporate machinery trying to keep a low profile while they wait to cash in.
Its not that any reward plan is perfect but stock options have a lot of flaws. Mass repricing of options for 84,000 employees is a blunt instrument that does little to keep the really good talent.
Let the employees drive share price and shareholder value to an "in the money" state. Options have done nothing but make executives rich without a corresponding positive benefit for the actual owners of the company - THE STOCKHOLDERS... We supply the capital not Directors, not Officers, and not the employees. You want our capital back, then earn it!
Actually, I'm pretty upset that Intel management has the gall to do this in this environment. There is absolutely no research that I am aware of that links options to employee retention. Also, this directly benefits employees, not shareholders, and this should be the other way around. Finally, Intel is assured that shareholders will see the "big picture" and approve this?!? Gimme a break. Most non-Intel employee investors are underwater. I say shareholders should make a big stink about this and get the message across to Intel management that you work for us, not the other way around.
To concerned parties, the vote on this is May 20.
Also its worth noting, Intel's compensation plan already includes annual profit sharing bonuses so in addition to salary employees receive extra pay for profit generated over a 12 month period. This plans works as it should.
Employee option appreciation is supposed to be linked to shareholder appreciation, the latter which is obviously missing in this proposal.