March 7, 2009

Critics say stock option exchanges unfair

Moves to allow U.S. corporate officers to trade in their low-value stock options for new, more generous options is unfair, critics say.

Companies from Google to United Therapeutics are making the moves, arguing that option exchanges that increase the chances company executives will be able to collect rewards even though the companies' stock prices have plummeted is necessary to retain talent, The Washington Post reported Saturday.

Critics, however, contend the practice undermines the goal of rewarding executives for performance and puts them on a different playing field from ordinary shareholders, whose only choices are to hold onto the devalued stocks or sell them at a loss.

It goes to a sense of entitlement, which I think is misplaced, Con Hitchcock, a lawyer who advises activist investors on corporate governance, told the Post. There are a lot of people other than executives who could use good-performing stock in their portfolio.