They can call it red beans and rice as far as I'm concerned. I just don't see the Area 51 helicopters around this issue. If they re-price the same number of options at the far market price at the time of the new strike there there is no downside as far as I'm concerned.
What stock options represent really is time. The time employees go above and beyond their job. If you look at those job ads that were up on the website most of them warn those applying that working overtime and weekends is part of the job description.
If you work for years and your options are getting close to expiring underwater it can be demoralizing for an employee or manager that has put in his or her personal time to meet company goals. Whether the stock price is depressed because of market perceptions or economic downturn the effect is the same. Employees with stock options lose out through little fault of their own. Re-pricing options helps to keep everyone's eye on the ball and allow rewards to be reaped for work already performed in the past.
CORPORATE LAW ISSUES include self-dealing and the business judgment rule. The following excerpt indicates that the board members who would benefit from repricing should recuse themselves from voting. Not possible in PPHM's situation.
"The duty of care under Delaware case law requires that the Board act in an informed manner after an investigation of all the material information reasonably available to it. Any determination with respect to a stock option repricing should be carefully analyzed and discussed by a fully informed Board or Committee. To ensure satisfaction of the due care standard in an option repricing, the Board should consult counsel and their accountants to summarize the key provisions of the option repricing and the expected benefits and costs to the corporation. As with any Board decision, this process should be documented and explanatory documents distributed to the Board members.
Further, the protection of the business judgment rule is unavailable if a director has engaged in self-dealing. A violation of a director’s duty of loyalty arises where the director has a material financial interest in the matter considered by the Board. With the rising use of stock options as a form of directors' compensation, a Board’s vote to reprice options may result in a claim that an interested board member has violated his duty of loyalty because the director has directly benefited from the stock option repricing. Many public companies utilize fixed option plans to provide for grants of options to directors on a fixed schedule. The safest way to avoid any appearance of self-dealing in a stock option repricing is either to exclude all Board members or provide that any Board member who will benefit from such option repricing recuse him or herself from any vote with respect to the repricing. The failure of a director to satisfy either the duty of care or loyalty does not necessarily invalidate the action of the Board, although the failure will eliminate the protection of the business judgement rule. Shareholder and investor relations issues will inevitably arise in the context of a stock option repricing. Over the last several years, many institutional shareholders have become increasingly concerned about shareholder dilution arising from what they perceive o be excessive option grants. Institutional shareholders often object to option repricings because they view it as rewarding poor performance and allowing employees holding underwater options to fare better than shareholders. Most state corporate laws do not require shareholder approval for an option plan or option repricings. The obligation, if any, to obtain shareholder approval for an option plan arises from the relevant stock exchange or tax code requirements for incentive stock options. However, many institutional shareholders are requesting specific prohibitions on option repricings as a requirement for their affirmative vote when considering either the approval of a new option plan or authorization for additional shares under an existing plan."
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