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Google Employees Grab New Deal

Posted Thursday, March 12, 2009 - 12:15pm

Once upon a time, more than 15,000 Google engineers and marketers saw a company whose stock price was guaranteed to soar above the $500-per-share range and slavered over the prospect of cashing in their stock options. When Google's stock started sliding toward $300 a share, these code-monkeys and flaks got jumpy, and in January, Larry and Sergey offered them a chance to reset their stock options at around $308 a share, to stave off a feared exodus of talent.

Now, Google has revealed that some 93 percent of their vested employees have taken advantage of this option. After a set period of time, Google's employees can cash in their theoretical stock and make a bundle if the price rises significantly above $308. This has left ordinary shareholders grumbling, since their own stocks won't get the same revaluation; as Siicon Alley Insider's Henry Blodget says, "It makes a mockery of the 'align employee interests with shareholders' argument used to justify piggish option allocations in the good times."

But we're more interested in the 7 percent of vested employees who said no to Google's deal. Do they really think the company's stock price will return to $700-plus levels? Do they know something we don't?

Chris Thompson is a writer living in Brooklyn.

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Submitted by rabagley on Thu, 03/12/2009 - 5:45pm.

I am one of the 7% who didn't opt-in.

As was publically reported, the option repricing offer included a negative incentive as well: any unvested shares have a 6 or 12 month delay in their vesting schedule. My options are priced close enough to the new price that I didn't feel the slightly better price was worth waiting an extra 12 months to vest. I suspect that if you were able to get information from more of the 7% who didn't reprice, you would find a financially rational explanation for each and every decision.

Submitted by kgsbca on Thu, 03/12/2009 - 4:08pm.

Blodget is wrong.

If shareholders are unhappy with the price of the stock, they can sell it. If employees are unhappy with their compensation, they can quit. If you are running google, and your top priority is growing your company, not your share price, the choice is clear: you retain your good employees. And, as every smart manager should do, ignore Blodget's advice.