Google (GOOG) stock is about 50% off its 52-week high. So it wasn’t much of a surprise when, during today’s Q4 earnings call, Google CEO Eric Schmidt said 85% of the company’s employees own some underwater stock options.
That’s a dangerous position for Google to be in, because viable options are a strong motivator and incentive to stay at a company, especially in Silicon Valley.
Good news for those employees: They’re getting a bailout. Google plans to create a stock options exchange program, allowing employees to swap their underwater options for ones with strike prices set at Google’s current share price. In return, participating Google employees will give up 12 months of vesting — a way of assuring those employees will stay at the company longer.
We’ve already heard complaints from shareholders that this will dilute their stock — but come on. All forms of employee compensation cost shareholders at some level, and if this stock option exchange encourages Google’s talent to stick around (and not start a new search rival or join Facebook), then it will be entirely worth it.
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