We are talking about new incentive plan here, apart from usual "world spread" innovation I can find only one Real reason: stock is not going much higher and Insiders are the best people to know it and are not ready to work just for salary and worthless stock options. Apart from latest hype Google did not make much this year as stock, slowing growth and rising Capex will compress Free Cash Flow and stock will fall, technical picture is telling about it very loudly.
Needless to say I am in agreement with Scott Cleland:
From Henry Blodget (comments are his ones) http://www.internetoutsider.com/2006/12/google_stock_op.html#comment-26560983
"Analyst Scott Cleland weighs in with a list of negatives. I don't agree with any of them.
Cleland says the new plan will enable employees to "rush for the exits", creating a short-term culture in which employees don't care about the company's long-term value. He says a restricted stock plan would be much better, because it is long-term focused. What he may be missing is that the new options vest on the same schedule as the old ones and on the same type of schedule that "restricted stock" would vest. Employees will not be able to sell the new options sooner than the old options. They will just be able to collect some of the "time value" of the options that they would otherwise give up if they did not hold the options to term. This feature might encourage employees to sell earlier, but it should not trigger a rush for the exits any more than a cash salary would trigger one.
Cleland says the new program tells us that Google is having trouble hiring enough smart people because the stock price is so high (implication: they know it's overvalued). This may be true, but it doesn't undermine the idea of transferable options.
Cleland suggests that the program will lead to even more dilution for shareholders. This is only true if Google grants more options than they would have under the old program. They will probably do exactly the reverse: grant fewer options (because each option will be worth more). What Cleland may be missing is that by "transfering" their options to an investment bank, the employees will NOT be exercising the options. They will merely be selling them to another party (which may or may not exercise them at some future date). What matters is the number of options granted, not whether/when they are transferred.
Cleland says Google is arrogantly "innovating without permission" and should have checked with the SEC. According to Google, they DID check with the SEC. And, again, it's hard to see why the SEC would have a huge beef with an idea that's better for both shareholders and employees.
More alleged negatives? (I'm sure there are some--I just haven't heard any good ones yet)."
Cleland says the new plan will enable employees to "rush for the exits", creating a short-term culture in which employees don't care about the company's long-term value. He says a restricted stock plan would be much better, because it is long-term focused. What he may be missing is that the new options vest on the same schedule as the old ones and on the same type of schedule that "restricted stock" would vest. Employees will not be able to sell the new options sooner than the old options. They will just be able to collect some of the "time value" of the options that they would otherwise give up if they did not hold the options to term. This feature might encourage employees to sell earlier, but it should not trigger a rush for the exits any more than a cash salary would trigger one.
Cleland says the new program tells us that Google is having trouble hiring enough smart people because the stock price is so high (implication: they know it's overvalued). This may be true, but it doesn't undermine the idea of transferable options.
Cleland suggests that the program will lead to even more dilution for shareholders. This is only true if Google grants more options than they would have under the old program. They will probably do exactly the reverse: grant fewer options (because each option will be worth more). What Cleland may be missing is that by "transfering" their options to an investment bank, the employees will NOT be exercising the options. They will merely be selling them to another party (which may or may not exercise them at some future date). What matters is the number of options granted, not whether/when they are transferred.
Cleland says Google is arrogantly "innovating without permission" and should have checked with the SEC. According to Google, they DID check with the SEC. And, again, it's hard to see why the SEC would have a huge beef with an idea that's better for both shareholders and employees.
More alleged negatives? (I'm sure there are some--I just haven't heard any good ones yet)."
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