Investors have plenty of other reasons to despise options exchanges in particular. Just like straightforward attempts to reprice underwater options, exchanges bail out execs out in a big way, severing the link between pay and performance. That, corporate governance experts say, removes some of the performance incentive options were intended to instill. Employees are practically addicted to them. And investors are realizing that's not a beneficial situation.
Many companies continue to insist that repricings are essential to keep top talent in their ranks.
But in today's market, when a performance incentive paid in options can sink underwater in a flash, such offerings have little power to attract or retain employees. In fact, companies that have tried repricings and exchanges concede that they have had little or no impact on attrition. In a topsy-turvy economy, nothing is quite so attractive as a sure thing. And paying cash is not only fair to employees, it's not dilutive to shareholders. In a rising stock market, using options to attract and keep employees made sense.