Compensation experts had been saying that if we had a market correction, or if earnings and stock prices declined, many shareholders could become more concerned about the whole stock option cost issue and pressure boards to do something about it. The modeling tools are specific to stock options, and the record-keeper includes option expiration and vesting dates. The calculators tell users their net gains after taxes, personalized by state. The modeling tools help users determine when to exercise options by looking at comparisons to alternative investments. Nonetheless, we really haven't seen any attitudinal change at the corporate level.
Stock options continue to be the coin of the realm.
Forty-two percent of companies surveyed say that they expect the overall size of their stock option grants to increase over the next three years. The study uncovered a moderate trend toward increasing vesting schedules to four years. The Tax Issues One of the worst scenarios for an employee who exercises a stock option is for the value of the stock to fall dramatically in a year after the option is exercised and the stock has been acquired. That's because the employee must pay taxes on noncash income during the year of acquisition. The employee may have to raise the cash from other sources to pay the tax.