Sirius XM Radio, has just exercised his own mega grant of stock options letting off another time bomb.
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Another good idea is letting shareholders approve every grant of stock options.
Maybe the options grant was their way of paying him back for providing Liberty with such a golden opportunity to coin money out of thin air just because they were cash rich at a time when Sirius was cash poor.
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Whether in the form of options, the outright grant of shares, bonuses tied to criteria such as earnings or revenue growth, or some other means, pay should be explicitly aligned with the long-term interests of the owners, not short-term blips in share prices or profits.
Harrah's countersued and accused the other directors of taking advantage of their position to grant two members generous stock options.
The biggest executive pay packages are nearly always dominated by options, which are typically a grant of a right to buy shares in future years at the price those shares are today.
Its management also won permission to increase the share options it can grant from 10% of total shares to 50%, and to let major shareholders sell their holdings in six months, instead of two years.
The employee is then fully vested in all of the options in the sixth year from grant.
"Defendants backdated every companywide grant from 1998 to 2001, and they backdated grants of options to new employees, " according to an affidavit submitted to the Federal District Court in Brooklyn.
But, because options will be expensed over the vesting period of the grant, that number compounds.
The grant (1, 783, 800 options or 4.5% of outstanding shares) seemed large to me, and may have also turned off other shareholders, contributing to the heavy selling this week.
Other employers use the graded vesting schedule that allows employees to become invested in one-fifth of the options granted each year, starting in the second year from grant.
Stock options with an exercise price of fair market value or higher on the grant date qualified as cap-exempt performance-based compensation, while service-vested restricted stock did not.
But if the grant is backdated, the options value isn't fair--at least not from the vantage point of the company and its shareholders.
The plans are voluntary and differ from restricted stock, stock options and so-called employee stock-ownership plans, all of which allow companies to grant stock to employees or managers that can't be cashed in until a later date.
If those granting options are aware of significant, non-public company information, they must be satisfied that the grant actually furthers legitimate corporate interests and isn't merely a windfall.
Most options were plain vanilla, with an exercise price equal to fair market value on the date of grant, ten-year terms and a three- to four-year vesting period.
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