Benefits January 26, 2009

Google Offers Employees 'Underwater' Options Exchange

January 26, 2009 (PLANSPONSOR.com) - After last week announcing its first-ever decline in quarterly profit, Google Inc. says it is allowing its employees to swap their stock options for new ones that will give them a better chance to profit from their holdings.
Reported by

The company outlined the exchange program last Thursday in its fourth-quarter earnings report. According to the Associated Press, Google shares ended Thursday at $306.50. The new options are expected to be priced on March 2.

The exchange program is scheduled to start January 29 and expire March 3.

Google said it is making the gesture to give employees greater incentive to remain at the company and work toward helping the company reach its goals.

The AP said a 47% drop in Google’s stock price during the past year drove its decision to give employees a chance to turn in options that have been awarded during the past few years. As of September 30, about 8 million of Google’s 14.3 million outstanding stock options had an exercise price of at least $400, leaving roughly 17,000 employees with options that are “underwater,” unable to be cashed in now at a profit.

Google will have to absorb another hit to earnings to pay for the new options being made available. Management expects the accounting charge to be about $460 million, assuming the new exercise price for the options is around $300, the news report said.

The AP reported that Starbucks Corp. also announced last Thursday a similar options exchange program.

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