Google Offers Innovative Stock Option Scheme

PreacherTom writes "In a bid to breathe new life into scandal-tainted stock options, Google plans to give employees a novel method of cashing in their options. The search giant will let employees sell their vested stock options to selected financial institutions in an auction marketplace it's setting up with Morgan Stanley. In the last year, employees and employers have been 'punished' by the IRS with new rules requiring options to show up as an expense on the bottom line. This has caused companies to tone down the granting of options. Google's move could once more significantly change compensation for employees in many industries, including tech." The new plan is intended only for Google employees, not executives. Google's motive is not saving money but rather continuing to retain employees with stock incentives in the face of considerable price volatility.

Comments

Or, you know...

[TheGreek]

...maybe they could just pay them more.

Re:Or, you know...

[flagg9483]

"...maybe they could just pay them more." But then you're missing the whole point on incentive based compensation. Giving stock options provides an incentive to work harder and improve the performance of the company. If you've ever been a manager you'd know that giving the same old raise every year does little to motivate employees, but when workers see a direct correlation between their effort and organization performance they can become great employees and have higher job satisfaction.

Re:Or, you know...

[flagg9483]

You obviously didn't read the article. The whole point of the Google plan is that it provides employees an opportunity to cash in the value of option and opt out of the equity investment should they so desire. It also still gives them the chance to hold company stock if they want to take the investment risk which is what Google would like. As a Chartered Accountant and auditor I'm quite familiar with Enron and the impact its had on my industry. In the Enron collapse there were two main problem caused by stock options. First, at Enron, executives who had significant share holdings were motivated to increase their own personal wealth at the expense of shareholders and employees. As the article states, this is for employees and not executives, so it shouldn't interfere with management's stewardship function. Second, employees lost money because they didnt properly diversify their portfolio's and because the proper regulations weren't in place to allow and insure investment risks were mitigated. The Google plan mitigates the risk of employees holding too much of the company's stock by providing them a quick cash alternative. It looks very much like Google is sacrificing some of the benefit of traditional incentive based compensation by giving employees an escape route. Employees win.

WOw, what a neat idea

[Xemu]

The search giant will let employees sell their vested stock options to selected financial institutions in an auction marketplace

That's pure genius! Perhaps we could have professionals bidding on this market place and call them "auction brokers" and we can then have all these professionals work in a place we call the "auction exchange". We could then allow any company that meets certain standards to hold auctions on this market place and code different company auctions with a letter code we can call "auction ticker".
Imagine the possibilities.

Nice try google...

[danpsmith]

Google's move could once more significantly change compensation for employees in many industries, including tech.

Nice try Google, I mean you can try to change compensation for tech employees but in the end, as the saying goes: The bubble-era vision of a Utopian Internet is dented and dirty... The Lexus has collided with the olive tree, and its crumpled hulk spins in a ditch as the orchard smolders.