He knows the difficulties of inflated expectations and deflated stock options only too well. Employees are at a premium in a difficult hiring market, and we have to be competitive,'' says E.J. Holland Jr., vice-president for compensation, benefits, and labor relations at Sprint. While hanging on to employees is exceptionally tough in the tech sector, companies across the board are hardly immune. All these new option awards may sound nice for companies and their employees, but they're making institutional investors furious. Existing shareholders are the big losers when workers get special option grants.
Investors think the logic is twisted in another way, too.
While options were supposed to align the interests of employees and shareholders, the recent special awards and repricings do the opposite. Companies feel as if they have little choice. In such a scenario, both the company and shareholders would benefit from awarding the same options to existing employees. Of course, options aren't the only way to compensate employees. Many companies are boosting salaries and handing out extra-fat bonuses to keep workers happy.