High-Tech Executive Stock Options Drop Over the Past Year

During the past year, most executive positions in the high-tech industry experienced a decrease in both the percent of executives receiving grants and the total cost to exercise these options, according to a new study conducted by Culpepper and Associates.

(PRWEB) August 21, 2003 -- During the past year, most executive positions in the high-tech industry experienced a decrease in both the percent of executives receiving grants and the total cost to exercise these options, according to a new study conducted by Culpepper and Associates.

The percentage of executives receiving new stock option grants decreased by 7% and the median total cost to exercise new options dropped by 27%.

Of four high-tech industry sectors, only the Hardware sector maintained the level of option granting accompanied by an increase of 22% in the total cost to new exercise options. The software, IT services, and semiconductor sectors all decreased.

Recent reports of prominent technology companies switching from stock options to restricted stock awards indicate that companies may be using restricted stock as an alternative form of executive compensation. However, this practice was uncommon during the past year.

Overall, a drop in stock prices in the technology industry decreased the total cost to exercise options. Although executives would pay less to exercise these options, a 5% or 10% annual growth rate on lower-priced options yields lower returns than the same level of growth on higher-priced options.

In addition, a large amount of options issued during 2000 and 2001 are still underwater and not contributing to the overall compensation package of executives. Although not yet a common practice, recent reports of companies using restricted stock in place of stock options indicate companies are seeking alternative means to compensate their executives.

About Culpepper:
Culpepper and Associates provides compensation survey and financial benchmarks to high-tech industry executives. Founded in 1979, we focus exclusively on the needs of software, IT services, hardware, semiconductor, electronics, and telecom companies. For more information, visit www.culpepper.com.