Repricing and backdating

16-Jul-2016 18:45

“But I think the findings are still valid for two reasons.

First, it may be even more important to retain good employees when the economy is bad since they are the ones that will help the firm get through it.

J., also thinks that repricing could take a beating if it’s put to a shareholder vote.

“One suspects that shareholders would be averse to approving benefits that they would not be able to enjoy,” he says.

“Compensation consultants have estimated the costs of turnover—which include termination costs, vacancy costs until a job is filled, costs of hiring and training a replacement, and lost productivity with a new employee—at 50% to 200% of an employee’s annual salary.”So despite the controversy, repricing underwater options may in fact conserve funds by giving employees a stake in their current company.

“Despite the tight labor markets in which high technology firms may operate and their heavier use of stock options, we find no evidence that the relation between executive or overall employee turnover and repricing differs between high technology and non-high technology firms,” according to Carter’s paper.

No one can predict, with certainty, what will happen to repricing if a shareholder vote is required.

But investor sentiment, which is traced by the Investor Responsibility Research Center, may provide a clue.

“Prior research suggests that firms recognize this, and use stock options for retention.

However, the effectiveness of options for retention can decrease substantially if the option sinks underwater.”The cause-and-effect relationship appears to be fairly straightforward.

“Despite the tight labor markets in which high technology firms may operate and their heavier use of stock options, we find no evidence that the relation between executive or overall employee turnover and repricing differs between high technology and non-high technology firms,” according to Carter’s paper.

No one can predict, with certainty, what will happen to repricing if a shareholder vote is required.

But investor sentiment, which is traced by the Investor Responsibility Research Center, may provide a clue.

“Prior research suggests that firms recognize this, and use stock options for retention.

However, the effectiveness of options for retention can decrease substantially if the option sinks underwater.”The cause-and-effect relationship appears to be fairly straightforward.

NASDAQ also proposed similar changes, although that exchange’s proposal does not appear to directly address the repricing issue.