Add eBay to the list of technology company seeking to rescue its employees underwater options. Last week, the online auctioneer’s board of directors approved putting two proposals before shareholders at the company’s annual meeting on April 29 that would facilitate the exchange of underwater options for a smaller number of restricted shares that will retain value as long as eBay’s stock price does.
“Like many companies, we have experienced a significant decline in our stock price over the last year in light of the current global financial and economic crisis,” states the board in its extensive argument in favor of the plans.
However, while eBay shares have indeed fallen over the last year, hitting a 52-week low of $9.91 on Friday, the company’s stock price has been under pressure for years now since peaking at $58.17 at the end of 2004. They lost 26 percent in 2005, 30 percent in 2006, gained gained 10 percent in 2007, and fell 58 percent in 2008. So far this year they are down another 26 percent.
This may explain the shaken belief in the stock option as a reliable instrument of compensation, and why the board has opted to replace stock options with restricted stock, which, “provides value to our employees even if current economic conditions continue and our stock price fails to increase further.”
The company’s top executives, who’ve been getting restricted stock in addition to stock options for years now, won’t get to exchanged any of their underwater options for restricted stock, “because we believe that their compensation should remain at greater risk based on our stock price.”
Risk taking on the part of the executives named in the company’s compensation table later in the same filing seems a bit less risky when you consider that they were granted among them some $23 million in salary, bonus payments, restricted stock and other perks, along with options valued at another $23 million, that are also underwater.