Repricing Stock Options
Stock repricing is a strategy to increase employee retention and make stock options more valuable to employees. Companies typically consider this option when they are out of stock and are having difficulty retaining employees. Some companies leave top executives out of this process and only make repricing available to middle-managers and front line employees. Because employee retention is costly, repricing stock options can be an important survival strategy for some companies. Here's information on repricing stock options.
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Instructions
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Get shareholder approval. The first step in repricing stock options is getting shareholder approval. The Securities and Exchange Commission began requiring this practice in 2003.
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Win over proxy advisers. These advisers have clout with investors and can influence how they vote on repricing stock options. Senior managers and executives should meet with proxy advisers to discuss the benefits of repricing stock options.
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Explain how stock options affect employee recruitment and retention. Some companies depend on stock options to retain employees. In bad economic times, repricing stock options can positively impact employees and encourage retention.
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Make sure your pricing strategy is shareholder friendly. Gain shareholder's votes by heading off any possible concerns. Excluding top executives and senior managers from the repricing strategy can assist in this process.
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Make sure to have the necessary disclosures in place. When repricing, all employees should receive disclosures and filing requirements. These documents should be made available early to allow plenty of time for employees to decide if they want to participate.
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Tips & Warnings
Shareholders often only vote once a year. If your shareholders meet annually, consider requesting a special meeting to discuss repricing stock options.
Understand the tax implications. Before moving forward with repricing stock options, seek the assistance of your company's accountant. This process can have tax implications for your company.
