‘Underwater’ stock options: Whether to stay put or swim out

Dec 11 2012, 10:12 IST
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SummaryAs a result of the stock-market dip, employees of many companies now hold stock options that have little retention incentive or motivational value because their exercise price far exceeds the current fair market value of the underlying shares.

may replace them with a cash award of a pre-determined value; and if the same are ‘in the money’, the employee can exercise them and realise the value from the market.

No one method will work for all employers and, thus, based on the impact analysis, the management can decide on the viable way to deal with the issue.

The author is director, Tax & Regulatory Services, Ernst & Young. Views expressed are personal

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