When a company like Apple decides to reward and motivate employees through grants of stock options, shouldn’t they be able to choose between the number of options granted and the date (thus price) of options? Shareholders want both effective ways to motivate employees, and minimal dilution of their holdings caused by new share issues via employee options. Apple can’t know when and by how much stock shares will rise or fall, so they have an incentive to issue options at the lowest possible price. They would naturally pick the lowest share price during the quarter.

Management’s goal is to both offer the least-cost compensation to employees and the least-impact-to-shareholders compensation and motivation. So if the goal is to provide $100,000 to an employee via options (and the marketplace of similar tech companies influences what employees expect or think just..without enough compensation, Microsoft hires away more key Apple employees), the fewer share options Apple offers to equal a $100,000 value, and the less the dilution to shares outstanding. Do New York Stock Exchange or SEC regulations require Apple to report on a day-by-day basis the number of share options granted? Or must they report potential “exposure” to shareholders from possible dilution that options grants might cause? Yesterday’s news report on Apple says:

“The company also said that the scale of the manipulation of share options grants was much wider than previously revealed, extending to 6,428 grants for executives and other employees on 42 separate occasions”

And continues:

“Apple is the highest-profile of more than 160 companies under investigation for turbo-charging executive pay by backdating share options. By pretending they were granted on dates when the share price was low, companies were able to artificially inflate the profit made when the options were exercised.”

Why can’t a company like Apple just issue 100,000 shares of stock to itself and dole out to employees options for that stock at any price the company wishes? I assume tax issues are key along with SEC regulations. Or are there major shareholder concerns? I would think the main Apple shareholder concern now is that federal government regulators will continue to distract Apple executives from their work. The whole thing should be a matter for the stock exchanges to deal with. No one knows what the ideal rules should be for granting options. Competing stock exchanges have an incentive to discover and enforce them. The SEC has no such motivation.


WordPress database error: [Table './dailyspeculations_com_@002d_dailywordpress/wp_comments' is marked as crashed and last (automatic?) repair failed]
SELECT * FROM wp_comments WHERE comment_post_ID = '373' AND comment_approved = '1' ORDER BY comment_date




Speak your mind


Resources & Links