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. I understand the need to attract and retain management, but when management can potentially award options for nearly one-quarter of a public company and reprice them without shareholder input, it becomes absurd. Our biggest concern is that repricing saddles the public owners with the entire loss in stock value, rewards the ones in control of the company for a stock price drop and avoids shareholder approval. The WRS serves over 435,000 active or retired employees of state and local government.