English, Article edition: Liquidity and employee options: An empirical examination of the Microsoft experience Chance, Don M.

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Bookmark: http://trove.nla.gov.au/version/31977
Physical Description
  • article
Language
  • English

Edition details

Title
  • Liquidity and employee options: An empirical examination of the Microsoft experience
Author
  • Chance, Don M.
Physical Description
  • article
Notes
  • In recent years several companies have offered employees the opportunity to transfer certain out-of-the-money options to a dealer. This paper examines one such high-profile program offered by Microsoft in 2003. The program was not very transparent in that employees were forced to decide whether to tender their options before knowing how much they would be offered, and it had only a modest rate of participation. Nonetheless, the market easily absorbed intense selling pressure as the options were transferred and hedged. The dealer, JPMorgan Chase, though profiting from the transfer, apparently failed to hedge the volatility risk it accepted from the employees and lost nearly the entire value it paid for the options. The overall experience has important implications for the design of programs that are intended to solve problems of low morale and increased turnover caused by underwater options.
  • Employee stock options Liquidity Compensation Turnover
  • RePEc:eee:corfin:v:15:y:2009:i:4:p:469-487
Language
  • English
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