Returning from the Training Solutions show, this week’s guest column from FTdynamo looks at more tortuous developments in the murky world of remuneration and options
The British firm Marconi, better known under its previous name GEC, has announced that, after recent market turbulence, it wants to re-price the options it had made available to staff. Currently 34,400 Marconi employees have the option to buy 1000 shares in the company at £16.03 a share – not much of an incentive, with the company’s shares currently standing at around £2.50.
Now, you may feel that we are being old-fashioned, but we had always understood that the point of options contracts was that, as with their underlying shares or indeed any other financial security, their value can go up or down. This is the traditional health warning that stands in the small print of most financial agreements.
But now the plan is to uproot the goal-posts and move them to an altogether different part of the playing field. The other relevant English metaphor would be the one about having your cake and eating it.
The telecoms sector has been hit terribly hard in recent months, and no-one foretold the sort of decline in valuations that has occurred. It is admittedly a depressing prospect for staff that their options lie so deeply under water. And at least Marconi’s management had made the options scheme open to all employees, not just the board.
But it is the same board that has presided over such a disastrous fall in the company share price. And directors too would benefit from the planned re-pricing. One shareholder told the Financial Times: “I have a lot more sympathy with the middle managers who have nothing to do with it. It is the board who have got us into this position in the first place.”
A few tired and unconvincing arguments have been rolled out by Marconi to defend the proposed re-pricing. Talented staff must be retained, the company says. Incentives must be protected.
But, one is forced to ask, how talented are the staff who have steered Marconi into this position? How much demand are they in?
Fortune magazine has just published a cover story on “the great CEO pay heist”. Pay remains controversial, with no solution to the controversy in sight. But as for Marconi’s options scheme, we are forced to repeat the advice given by the Irishman to the tourist who is lost and trying to get to the next town: “Ah, you see, I wouldn’t start from here.”
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