SWIB considers the plan to be excessively dilutive, allows for options to be awarded under fair market value and expressly permits repricing of options. In addition, Auspex has a history of repricing options. Repricing refers to a practice that companies are increasingly using when a company has issued stock options and its stock price then drops, making the options less valuable.
Companies claim the practice is necessary to retain the appropriate level of incentive compensation.
A growing number of shareholders including SWIB, view the practice as unfair to existing owners. Late last year SWIB asked 22 companies to adopt a policy requiring shareholder approval of any option repricings. Eighteen adopted a policy, but for those that did not, SWIB filed a proxy resolution seeking to amend the company's by-laws to require shareholder approval of repricing. Shareholders generally have the right to bring such by-law amendments under state law. SWIB has already contacted other Auspex shareholders about the concerns, including the company's largest shareholders.