Comp Briefs (Oct. 8, 2001)


San Francisco
— Although the perceived value of stock options has taken a hit in the past year, companies, and the people they employ continue to look favourably upon them as powerful value generators, according to a new U.S. study. Fully 80 per cent of companies that have experienced underwater options have no plans to change their compensation philosophy to eliminate the use of stock options, a survey of 107 companies conducted by San Francisco-based compensation consulting firm iQuantic Buck reports. Of the firms surveyed, 89 per cent reported having recently experienced underwater issues. Among the studies other key findings:
•employee retention concerns continue to drive companies that are adopting responses to underwater issues;
•most companies are still relying on the supplemental grant response;
•of those companies that did not respond to underwater issues with some form of value-replacement vehicle, 39 per cent cited shareholder concerns as the reason why;
•some companies have implemented more than one strategy;
•vesting is proving to be a good opportunity for companies to be creative in their responses; and
•the economy is taking the brunt of the blame for underwater options, as opposed to company or industry-specific issues. Therefore, executives are participating in the value-replacing stock option strategies.

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Murray Hill, N.J.
— United States-based employees of Lucent Technologies have launched a class action suit against the company because the firm is offering stock options in its pension plan. The suit alleges the company breached its fiduciary duties by continuing to offer the company’s stock as an investment option in its long-term savings plan for management employees and retirement savings and profit plan. The plaintiffs allege Lucent’s executive team was aware of numerous business problems that made the stock inappropriate as a retirement investment option. Lucent says it will vigorously defend itself against the suit.

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