On Stock Options, Google Gets Creative

Under the program, Google will grant employees a new type of option called a transferable stock option. Under certain circumstances, outside investors will be allowed to bid for those options.
The ability to sell these options, which allow the holder to buy Google stock at a specified price, changes the game for Google employees. As The New York Times reported Wednesday, outside investors are likely to pay more for these options than the employee would earn by exercising it. Even “underwater” options — those with an exercise price above Google’s current stock price — could have some value to outside investors, who may expect Google’s shares to rise, putting the options in the money.
Analysts, experts and columnists described Google’s move in generally glowing terms, calling it “elegant” and suggesting it was a win for both employees and shareholders. But the reaction was not entirely positive. Several people raised the possibility that Google was making it too easy for employees to cash out their options early, undermining some of the usefulness as an incentive.
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