Not for very long. So it goes in some corners of corporate America these days. Not all shareholders, it seems, must live with lousy investment decisions. No one knows how many companies have allowed employees to back out of ill-timed investments. But the practice has drawn the attention of the Securities and Exchange Commission, which announced earlier this month that companies now must disclose how these transactions affect profits and earnings per share, a move that could put a crimp in the practice.
Critics say rescissions reward some shareholders at the expense of others.
If you're going to let people rescind the transactions, you've literally removed all the risk. But companies offering these plans deny they disadvantage nonemployee investors. During the height of the technology-stock frenzy last year, they made many employees millionaires, at least on paper. But exercising stock options also can create hefty tax bills. Nonqualified stock options account for an estimated three-quarters of employee options.