Stock Option Repnclng: What Now?

Abstract

Stock options are the lifeblood of Silicon Valley. Indeed, they've become the vehicle for shifting the balance of success-sharing between shareholders and employees, creating a bigger pie to share, and increasing shareholder tensions in the process. Because stock options are so important to companies in Silicon Valley, repricing has become critical for the survival of companies with stock prices that turn south. Repricing stock options has become the best, and sometimes only, defense for these companies. FASB recently proposed a new accounting treatment for repriced options that could very well be the death knell for this practice. But the needs that have driven companies to embrace repricing will continue unabated. This article puts those needs into perspective and identifies some alternatives that companies may adopt in lieu of repricing, or in combination with a modest repricing.