Business life: My finance news blog

Intel is seeking permission from its shareholders to revalue worthless employee stock options, a controversial move that the world’s biggest chipmaker says is needed to retain critical staff.

Under the plan, Intel would exchange underwater stock options — whose exercise prices are above the current stock price — for new options at current market prices. The offer would be open to all employees excluding senior executives.

While the move might offer incentive to hard-working employees, it could face opposition from some shareholders who are not being similarly compensated. Other technology companies that have taken similar actions include Google, eBay and Advanced Micro Devices.

Still, having cut some 20,000 jobs since 2006, Intel said it cannot afford to lose staff crucial to certain projects.

“Many of our employees are engineers, scientists, and other specialists who are working on important multiyear research and development projects or have skills that they have developed over the years and would be difficult to replace,” Intel said in a filing of its proxy statement with the U.S. Securities and Exchange Commission on Monday.

Intel said the plan should be cost-neutral since it had accounted for the cost of the options when they were granted.

Chairman Craig Barrett told Reuters he anticipates Intel shareholders will see the big picture, and the value of retaining key employees, particularly in troubled economic times no fax payday loan.

“I don’t think there’ll be shareholder backlash,” he said in an interview on the sidelines of a panel on wireless technology’s role in health care in Washington D.C.

Intel shares were up 4 percent in early afternoon trading on Monday, riding a bullish wave in broader markets.

So far, shareholders do not appear to be troubled by the plan, since they have more important strategic concerns including the status of microprocessor demand and the health of the personal computer market, according to Stifel Nicolaus analyst Cody Acree.

“As far as the lists of concerns, the stock option re-pricing falls fairly far down the list,” he said.

Intel also said it planned to freeze top executive salaries and reduce contributions to its employee retirement savings plan and employee stock purchase plans — which together should lead to significant cost savings in 2009.

In 2008, Intel Chief Executive Paul Otellini earned $12.1 million in total compensation, including $4.8 million in cash.

99 PCT OF EMPLOYEE OPTIONS UNDERWATER

Companies often offer stock options to employees as a way to motivate and retain staff. But the options lose value when the market price of the underlying stock falls below the exercise price, which pushes them “underwater.” 

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