Google Unveils New Stock Option Program
In order to attract the world's best talent, Google is offering its employees the option to sell their stock option grants in an online auction to financial institutions that might be willing to pay a premium above the exercise price.
Traditionally, employees of the company could use their stock options in two ways: the first allows them to take ownership of the stock once they have "vested" and sell the stocks for a profit, paying the company back for the "strike price," which is the price of stock when the option was granted, or continue to hold the option.
However, with transferable stock options, the employee could now elect to sell the options through an online auction being managed by Morgan Stanley. Like the options market where investors would buy options on the speculation of the stock rising (or falling), financial institution may be willing to pay a premium to the price.
These companies may be willing to do so based on the speculation of the stock rising further from where the employees strike price is. Those employees who came into Google later would benefit most from this system, as their strike prices are considerably higher.
The company also said the program has a lot to do with making the system more fair for its newer employees. It is said that Google co-founder Sergey Brin led the call to develop the transferable stock options system.
For example, a person who may have joined Google in the past year may have a $450 strike price, and the current stock price in this example is $490. If the employee is vested, he could use the auction to sell the option to a speculative investor.
If the investor was willing to pay more than the $490 stock price on the speculation that Google's stock would rise, the employee stands to make a bigger profit than selling it in the broader market.
"In addition to increasing the value of every option employees receive, the TSO program makes the value of their options much more tangible," Google Recognition and HR Systems Director Allan Brown said. "By showing employees what financial institutions are willing to pay for their options, it is made clear that the value of their options is greater than just the intrinsic value," he continued.
The prices institutions are willing to pay would be displayed to the employee in real-time.
Higher-level executives would not be able to use the system, although it is open to any other employee who was granted stock options after the company's IPO.
Financial analysts have fairly universally given the program a thumbs up, saying it increases the value of the stock options that Google provides to its employees.