New Stock Options for Google Employees

A few years ago, I criticized a Wall Street Journal story that claimed corporate executives were profiting off 9/11 by granting themselves new options after the market dropped. I thought this was a completely made-up scandal. The article described perfectly legal activity in such a way as make it seem sinister (see here for my original post).
The reason why I mention this is that Google has essentially done the same thing the WSJ was complaining about two-and-a-half years ago. Here’s the AP story in full:

Google Inc. is allowing its employees to swap their stock options for new ones that will give them a better chance to profit from their holdings.
The Mountain View-based company outlined the exchange program Thursday in its fourth-quarter earnings report. Google suffered its first-ever decline in quarterly profit because of charges taken to account for its deteriorating investments in Time Warner Inc.’s AOL and Clearwire Corp.
Google will have to absorb another hit to earnings to pay for the new options being made available to its 20,222 employees. Management expects the accounting charge to be about $460 million, assuming the new exercise price for the options is around $300.
Google shares ended Thursday at $306.50. The new options are expected to be priced on March 2. The exchange program is scheduled to start Jan. 29 and expire March 3.
A 47 percent drop in Google’s stock price during the past year drove the decision to give employees a chance to turn in options that have been awarded during the past few years. As of Sept. 30, about 8 million of Google’s 14.3 million outstanding stock options had an exercise price of at least $400, leaving roughly 17,000 employees with options that are “under water” and can’t be cashed in now at a profit.
Google reasons employees will have greater incentive to remain at the company and worker harder if they have stock options that are more likely to yield a windfall.
The special treatment comes as Google is eliminating some employee perquisites and even laying off a smattering of workers to shore up its profits during the recession.

For the record, I don’t think there’s anything wrong in what Google is doing. But I’m curious if we’ll hear the same screams of protest that we got in the summer of 2006.
To use the problematic logic from the WSJ’s original article, Google executives are “profiting off” the global economic turmoil. Worse, they’re giving themselves raises while they’re laying their own people off.
Where’s the media outrage?

Posted by on January 23rd, 2009 at 10:35 am


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