Plans to give employees actual shares and will expense all equity-based compensation
Microsoft is dumping stock options for employees and will start giving staff actual shares in the company.
It is also going to expense the cost of the shares, which could have a significant impact on the bottom line.
Microsoft CEO Steve Ballmer said the changes “will help the company continue to attract and retain the best employees and better align their interests with those of our shareholders. These changes are a key step in our ongoing effort to position Microsoft for long-term success.”
Starting this September, employees will be granted what Microsoft calls “stock awards” instead of stock options. The stock award program offers employees the chance to earn actual shares of Microsoft stock over time, rather than options that give employees the right to purchase stock at a set price.
The company is also going to work on a plan to enable employees to realize some value on the portion of their stock options that are currently “underwater” — meaning that the price their options are set at is higher than the actual stock price — by selling the options to a third-party financial institution.
“Our company philosophy is simple,” said Ballmer. “We want to be a magnet for the best people by paying smarter. We want to attract and retain employees by offering real ownership and great long-term financial incentives. And we want to ensure that our senior employees’ total compensation is even more closely linked to growth in the number and satisfaction of our customers.”
As a result of the changes in its compensation approach, Microsoft said it will start expensing all equity-based compensation with its 2004 fiscal year, including previously granted stock options.
“Because stock awards must be expensed as they vest, we will include the cost of all equity-based compensation in both future and prior years’ financial statements to preserve year-over-year comparability,” said John Connors, senior vice-president, finance and administration and CFO at Microsoft. “We agree with others in our industry that there’s no one-size-fits-all approach when it comes to equity compensation programs and the resulting accounting for them. Every company has a unique set of circumstances and this is the appropriate accounting treatment for our new compensation plan.”
For more information on stock options, and the debate over expensing options, click on the “Related Articles” links below.
It is also going to expense the cost of the shares, which could have a significant impact on the bottom line.
Microsoft CEO Steve Ballmer said the changes “will help the company continue to attract and retain the best employees and better align their interests with those of our shareholders. These changes are a key step in our ongoing effort to position Microsoft for long-term success.”
Starting this September, employees will be granted what Microsoft calls “stock awards” instead of stock options. The stock award program offers employees the chance to earn actual shares of Microsoft stock over time, rather than options that give employees the right to purchase stock at a set price.
The company is also going to work on a plan to enable employees to realize some value on the portion of their stock options that are currently “underwater” — meaning that the price their options are set at is higher than the actual stock price — by selling the options to a third-party financial institution.
“Our company philosophy is simple,” said Ballmer. “We want to be a magnet for the best people by paying smarter. We want to attract and retain employees by offering real ownership and great long-term financial incentives. And we want to ensure that our senior employees’ total compensation is even more closely linked to growth in the number and satisfaction of our customers.”
As a result of the changes in its compensation approach, Microsoft said it will start expensing all equity-based compensation with its 2004 fiscal year, including previously granted stock options.
“Because stock awards must be expensed as they vest, we will include the cost of all equity-based compensation in both future and prior years’ financial statements to preserve year-over-year comparability,” said John Connors, senior vice-president, finance and administration and CFO at Microsoft. “We agree with others in our industry that there’s no one-size-fits-all approach when it comes to equity compensation programs and the resulting accounting for them. Every company has a unique set of circumstances and this is the appropriate accounting treatment for our new compensation plan.”
For more information on stock options, and the debate over expensing options, click on the “Related Articles” links below.
