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ARE YOUR STOCK OPTIONS UNDER WATER?Taking stock in these turbulent timesBeing a corporate employee can be mighty enriching if you're one of the 6 million who receive stock options. These grants of rights to buy company shares are given out as a way to retain top talent, lure job candidates, and give existing employees a piece of the business. They cost workers nothing. But they can be worth a bundle in extra compensation if Wall Street is in a bullish mood. Or you can get zilch. With the recent gyrations on Wall Street, slips in corporate profits, and the economic problems abroad, stock-option windfalls will be decidedly harder to come by. Employees with stock options at Nike (NKE), Boeing (BA), and BankAmerica (BAC) are among those feeling the heat as their company shares head south and their options slip under water. Figuring out what to do with options whose exercise price is above the current share price is tougher than managing these perks when they're in the money. Much depends on the employee and company. If you're an up-and-comer expecting to put in several more years in a job, you may not want to worry about dips in the market as long your company has good prospects. Options, like other securities, rise over time more often than they go down. Unless you really need the cash--or believe your employer's stock is unlikely to bounce back soon--you're best off riding out the rough patches. ''If you believe in the long-term health of your company, then staying the course makes a lot of sense,'' says James D. Atwell, a global managing partner at PricewaterhouseCoopers. If you are close to retirement, however, or need to diversify your portfolio by reducing exposure to a single stock, then it may be wise to book at least some of the value left in your options in a down market--if there is any value left. Before you act, make sure cashing out won't give your bosses reason to doubt your commitment to the company. ''It's an important sign to financial markets [and management] about how bullish you are on the company's ability to increase value,'' says George B. Paulin, president of Frederic W. Cook, a New York-based consulting firm. A key tip: See what the higher-ups are doing with their options. Of course, if you happen to work in an industry where jobs are more plentiful than qualified workers, stock options can be an important bargaining chip. In Silicon Valley, labor markets are especially tight. That means top talent can either demand greater compensation from their existing employer or jump ship to a high-flying company whose options are rocketing skyward. Nearly 90% of technology companies now offer stock options, compared with just 12% of all publicly traded companies, says the National Center for Employee Ownership. It's also a reason some companies have taken the controversial step of repricing employee options to a lower per-share exercise price. ''Companies need something that's attractive and has a golden handcuffs effect,'' explains Edward D. Burmeister, a lawyer at Baker & McKenzie in San Francisco. In the past five years, 30% of all companies that have granted options have repriced them. But Burmeister adds that you shouldn't bank on that happening. When it comes to stock options, the bottom line is, don't count on them until they are vested and the cash is in hand.
By Linda Himelstein in San Mateo, Calif. RELATED ITEMS
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Updated Oct. 29, 1998 by bwwebmaster
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