The new plan will have a term of two years – compared with 10 years for prior plans – giving shareholders more frequent opportunities to review the rules and potentially reject them. In addition, Intel is reducing the period during which employees need to exercise the options from 10 to seven years, having a positive effect on option overhang reducing it to 18% from its current 21% level, according to a report in the Oregonian.
Intel also plans on making the stock plan omnibus – offering more than one stock-based compensation vehicle – by asking investors to approve a restricted stock alternative. With this flexibility, Intel would be able to simply issue shares to employees, restricting when they can be sold. Intel spokesman Bill Calder said the restricted stock would be used in a very limited way, potentially to attract key employees.
With the passage of a new plan, Intel would have a replacement for it two current plans – a 1984 plan for executives that expires in May and a 1997 plan for all employees that expires in 2007.
In a filing with securities regulators Wednesday, the company said the changes came in response to accounting rule changes handed down by the Financial Accounting Standards Board (FASB) mandating that stock options be recognized as an expense (See FASB Hands Down Option Expensing Proposal ). The plan will not only serve to lower Intel’s potential enormous exposure, but also provide shareholders with more financial transparency.