Google employees get huge option break WORKPLACE

Google is trying to erase employee losses by offering to reset the exercise price on most of its outstanding stock options. The new exercise price, which is an employee?s cost for redeeming the option, will mirror Friday?s closing price of $308.57 for Google?s stock. less Google is trying to erase employee losses by offering to reset the exercise price on most of its outstanding stock options. The new exercise price, which is an employee?s cost for redeeming the option, will ... more Photo: Paul Sakuma, AP Photo: Paul Sakuma, AP Image 1 of / 1 Caption Close Google employees get huge option break 1 / 1 Back to Gallery

As Google Inc.'s stock price plunged along with the rest of the market this week, its employees were set up for a windfall down the road.

The market turmoil yielded a moneymaking opportunity for about 17,000 of the Mountain View company's workers because of a program that's supposed to help them forget about the nearly 60 percent drop in the company's stock price since a peak of $747 in November 2007.

To boost morale and retain workers, Google is giving them a second chance to profit from millions of stock options that were doled out in better times. The value of those options has crumbled as the economy has plunged into its worst recession since the early 1980s, leaving the stock market in shambles.

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Google is trying to erase those losses by offering to reset the exercise price on most of its outstanding stock options. The new exercise price, which is an employee's cost for redeeming the option, will mirror Friday's closing price of $308.57 for Google's stock.

Employees profit from options by cashing in on the difference between the exercise price and a stock's market price. So Google workers had an incentive this week to root for the company's shares to decline, lowering their exercise price and boosting the potential payout they could reap later.

Google's shares edged up $2.93, nearly 1 percent, Friday but still fell nearly $30, or about 9 percent, for the week.

About 85 percent of Google's 20,000 employees hold options that are "underwater," meaning the stock's trading price is below the exercise price.

The vast majority of those options are expected to be exchanged for rewards at the new exercise price before the exchange program expires at 6 a.m. Monday. Google chief executive Eric Schmidt and co-founders Larry Page and Sergey Brin - billionaires already - are the only employees who can't take advantage of the offer.

While stock option repricings please employees, they aren't popular among shareholders, who don't get the same opportunity to erase their losses.

Besides raising issues of fairness, repricing programs threaten to lower future earnings per share because companies will need to issue more stock when the options are cashed in.