Google Offers Exchange for Worthless Employee Stock Options

Yesterday, Google announced a limited time offer to bring its employees stock options back to par, by trading them for what their stock will be worth on March 2nd, 2009.

About 85% of Google’s (remaining) employees have stock options with a value which is, well, below zero. That is, their exercise price is higher than the market price.  I can say from experience that keeping options above water help preserve a firm’s entrepreneurial mindset.

This will cost Google approximately $460 million over the remaining vesting period for these shares, which ranges from six months to five years. That’s what Google’s board is ready to pay to keep staff motivated, and preserve some of the tech-start-up mentality that can fade with corporate growth.

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