• Silicon Alley Insider/Online Media Daily, Wednesday, March 11, 2009 12 PM

Like many big tech stocks, Google has been in a nosedive during the stock market's crash. However, as of yesterday, the company's employees holding stock options aren't nearly so badly off, notes Silicon Alley Insider's Nicholas Carlson, as the search giant exchanged more than 6 million employee-held stock options with exercise prices above $500 for options priced at $308.57. Of Google's 20,200 employees, 15,642 participated in the swap, Carlson says. And in exchange for the lower strike price, each agreed to a delayed vesting period. The company says the repricing will help it retain valuable employees, as reported Monday in Online Media Daily.

In another post, SAI writer Henry Blodget points out that the employee incentive comes at great cost to Google shareholders. "It's not 'evil,' per se, but it certainly shows where Google's priorities lie (employees first, shareholders second). It makes a mockery of the 'align employee interests with shareholders' argument used to justify piggish option allocations in the good times. And it also seems unwarranted at this point."

Why unwarranted? "Google's stock is down about 50% from the peak. Big deal: So is the S&P 500," writes Blodget. "Eric Schmidt says 85% of employees have options that are underwater. Big deal: Most Google employees who deserve to keep their jobs will get new options every year (the news ones won't be underwater). Google employees have "suffered" for a whole year since the peak. Big deal: The whole point of awarding options is to reward employees for building shareholder value over the long-term...Evil? No. But it's the easy way out."

Read the whole story at Silicon Alley Insider/Online Media Daily »