Bill, this is by no means a knee jerk reaction as you have stated. Many, especially me, have been protesting the exhorbitant amount of options that were given away in the past. Many have justified this by saying we needed to do it to attract the talent during the tech boom when it was difficult to hire qualified talent. Those times are over and many unemployed and even currently employed by other companies that are contracting would love to work at IDCC with its current prospects. Well the company has publicly stated that they intend on keeping staffing levels over the rest of the year at present levels. If that is the case, don't you think the un-issued options that remain under the 1999 plan plus the plan that was mentioned in the proxy today that was not approved by shareholders are more than enough to reward the individuals for the next 12 months? There are 2.5 million options that remain under the 2 plans. That should be more than enough to compensate 300 people for the next 12 months.
Most fortune 500 companies don't give away 5% of their outstanding shares to its employees on an annual basis when they employ thousands and even hundreds of thousands. Why should IDCC who employs only 300 people give away 5% of its outstanding shares in a 12 month period? That is how many shares they currently have available which is too many. Don't approve another 10% of outstanding shares, please.
We don't need to give away the store in the future just because we were willing (or stupid enough) to do it in the past. We gave away so much in the past as the argument goes because that is what the employment market required. Today the market does not require anywhere near the same compensation levels. Stock options are like being paid in lottery tickets and most of the rank and file today would be more than willing to be paid with cold hard cash instead of lottery tickets.
IDCC's current cash position allows them to pay in cash without the need to pay in options. If they want the rank and file to be owners, tell them that they are being given a bonus equal to X but you need to invest 20% of it in stock purchased in the open market. This way they accomplish the goals of making employees owners while at the same time rewarding long term investors by taking the stock from the weak hands in the market.
If there is such a great need during the next 12 months to approve additional shares over and above the currently available 2.5 millions shares due to a strategic business plan that occurs later, then have a special meeting for the sole purpose of approving additional shares. To give it to them now is just being dumb with your shares. It is like giving a politician a blank budget and telling them to spend what they see fit without any further oversight. Giving management another 5,000,000 shares to play around with is giving them a blank check worth millions and probably hundreds of millions of $$$$.
The biggest problem with too many options is the not the fact that the person being granted the option will be rewarded with the increasing stock price for the next 10 years. It is the fact that much of the options will be exercised and sold in the near future. The only impact of that will be a short term boost to the persons income, which is what a cash bonus would also provide, but more importantly it would increase the float forever which would be detrimental to our ownership interest forever. Sure at some point we could buy back those shares but at what cost per share? Why not just give cash bonuses today for their contribution to the company. Giving away stock is a very bad idea for anyone looking to hold the stock for the next 5-10 years. I don't plan on being in this for that long but plans do have a way of changing as I probably never would have thought when I made my first IDCC purchase back in 1993 that I would still be invested in it today.
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