Microsoft Corp. announced that it will abandon its stock-option program and
will grant stocks outright instead, a move the software giant says it made to offer a better
benefit to all of its employees.
Analysts tell Bloomberg News that the decision could be the beginning of a
trend in the industry.
"Since Microsoft is the bellwether, we can expect other technology companies
to follow suit," says Diane Garnick, chief U.S. portfolio strategist at
Dresdner Kleinwort Wasserstein.
The news agency notes that the company's stock options - in which the firm
allows employees to purchase stocks in the future at a fixed price - made many
employees millionaires in the boom years of the 1990s. The decline in price
of Microsoft's stock over the past few years has made many of the outstanding options worthless
because the shares traded below the fixed price.
In the tight labor market of the late 1990s, the practice of offering stock
options became a popular tool for firms to attract and retain talented employees.
A drop in the stock market and scrutiny from regulators and lawmakers has made
the options less attractive.
"Given that it's not likely Microsoft shares will appreciate as much going
forward than in the past, this might be more of an incentive for key Microsoft
employees because it's money in their hands right now," says Heather O'Loughlin
of State Street Global Advisors. "It's probably a better tool for retaining