Google May Have An Options Problem

The downside of using stock options to compensate young, overworked employees is that when the options are underwater — that is, when the strike price falls below the trading price — employees flee the coop. It could be an expensive predicament for Google. An estimated one-third of the search giant’s employees’ options are 100 percent […]

The downside of using stock options to compensate young, overworked employees is that when the options are underwater -- that is, when the strike price falls below the trading price -- employees flee the coop.

It could be an expensive predicament for Google. An estimated one-third of the search giant's employees' options are 100 percent underwater, according to Sandeep Aggarwal, a Collins Stewart analyst. The solution: Google could reprice shares, but it would be expensive for the company; shareholders would object; and it would likely weigh on earnings.

It's not just a Google problem, either. AMD, as the *Wall Street Journal *points out, is proposing a broad reprice of stock options in order to keep employees from leaving.