After spending $7.8 billion in fiscal 2007 buying back 297 million shares of its own stock, Cisco Systems is asking shareholders to approve more than doubling the number of shares left in its current stock incentive plan to 394 million, according to its proxy filed Wednesday.
Two years ago Cisco asked its shareholders to approve a stock incentive plan covering 350 million shares, which, along with shares left over from a previous plan, gave it a bank of 567 million shares with which to reward its workforce.
Since then the company has doled out to employees a net total of 413 million shares by way of option grants and other stock awards. The 154 million shares they have left in the plan won’t cover the estimated 185 million shares Cisco will give out in its current fiscal year, so its asking shareholders to approve adding 209 million more.
And although the company is asking its shareholders to extend the plan through fiscal 2012, it says that the new batch of stock will only last through 2009, after which it will need to seek more.
Cisco, like many other companies, is increasingly using restricted stock grants for
compensation, which maintain value even if the stock price drops after the shares are given, unlike stock options, which pay off only after share prices rise.
The company is asking shareholders to lift the 35-million-share limit for restricted stock grants the plan now imposes. In exchange, it wants each future restricted stock grant to count as the equivalent of 2.5 shares reserved under the plan.
In defending its request for more shares, the company points out that, “”Despite an expanding work force of 26.6% per year on average from fiscal 2005 to fiscal 2007, Cisco has reduced long-term equity incentive grants from 230 million in fiscal 2005 to 200 million in fiscal 2007”. It also reports that “”over 80% of all equity awards were granted to employees below the vice president level”.
Since announcing a stock repurchase program two days after the Sept. 11 terrorist attacks in 2001, Cisco has spent $43.2 billion buying back 2.2 billion shares of its own stock. On July 26, the company approved an additional $5 billion worth of purchases raising the total amount it has left with which to buy stock to $8.8 billion.