Advanced Micro Devices Inc (AMD)

[sgolds]

rupert, first let me say that I am a strong proponent of stock options as a way of motivating employees to give better value to the shareholders. I am also against the moves to expense stock options because they do not represent a real expenditure of cash. (However, they should not have a tax advantage to the company, either. They should be tax neutral.)

Now, on AMD's 2004 Stock Option plan, they do not set the vesting period. Most option plans have a four year vesting: 25% vests at the end of the first year of employment and 1/48 vests each month after that. This assures that the employee (or contractor) gives value first, gets the stock later.

If you leave the vesting to the compensation committee then they will be tempted to give immediately vesting stock to star recruits. For instance, 50% vests immediately and the other 50% over a regular basis. This is a huge disincentive for the employee to stay and actually do the work he is recruited for - he already has the goodies. I see nothing in the new plan to prevent this type of unhealthy competition for star recruits, so I will probably vote against it. (I am hoping someone here can show where the plan has such protection, but no one has done that yet.)