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.

Nobody is punished

[nuggz]

sheesh
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.

Stock options are an expense and should be accounted for.
Google is trading at $480/share today. If Google issues 1 new share, the value of that share is $480. If this new share is traded for $480 there is no loss of value.
If Google gives away this share for less than $480 they are basically losing that extra money. Forcing a company to record this lost money is entirely appropriate. There is no punishment, it just creates a more realistic view of the companies finances.

As for options vs stock the valuation is slightly more complicated, but still well documented and understood.

Re:Or, you know...

[nelsonal]

Well essentially they are, as most people under value their stock options. In Google's case viewing a 2 year option at intrinsic value is a substantial undervaluation. To give you some idea an option with a strike price of $600 (well above that of any employee stock options) is worth about $70/share, but good luck convincing the employees who got a grant with a strike of $500 or 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.