Ducks in a Row: Stock Options
by Miki Saxon
I’ve worked with startups for many years, first as a headhunter and later as a coach. My company is in the process of launching Option Sanity™, an incentive stock allocation system based on founder/company values.
People join startups for many reasons and one is the possibility of substantial financial rewards; they take a sizable risk that only pays off if the company is acquired or goes public.
But what of the gigantic payouts public companies are giving execs who took no real risk and whose actions aren’t actualy responsible for the stock price.
Stock granted when the market is down, as it is in any recession, goes up no matter what management does or does not do. Yes, management skill can drive it higher, but, as the old saying goes, a rising market lifts all boats and that is whether the skipper has a clue or not.
This recession is no different; in fact the payouts are going to dwarf anything seen previously. They may not equal the obscene bonuses paid by Wall Street, but they are pretty obscene in their own right.
An Associated Press analysis of companies in the Standard & Poor’s 500 index shows that 85 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some the value jumped by a factor of 10 or more. An Associated Press analysis of companies in the Standard & Poor’s 500 index shows that 85 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some the value jumped by a factor of 10 or more.
I’ve never met workers who thought they should earn what their bosses earned, but they do what they hear in the news to make sense when measured against the company’s success.
I doubt anyone inside or outside of Apple has ever questioned Steve Jobs’ value when they hear about his compensation.
Carol Bartz received $47.2 million in 2009, 90% from stock options that went up primarily because the market did.
I wonder how motivated Yahoo employees are knowing that.
How motivated would you be?
Flickr photo credit to: Svadilfari on flickr
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