March 26, 2020
Repricing Options & Exchange Program Considerations
– Lynn Jokela
Yesterday, I blogged about the need to all consider available options for addressing the impact of the current crisis on compensation programs. With all the market volatility, many are left wondering how long it will take for a market to recover and how long recent incentive grants will remain underwater. This recent Shearman & Sterling blog dives into option repricing and exchange programs and says there may be renewed discussion about them – something we haven’t heard much about since the 2008 financial crisis. No doubt though – many shareholders frown upon repricing and exchange programs.
It might be early and a repricing or exchange program won’t be realistic for all companies, but some may want to at least think about it.
The memo walks through different approaches for those that do want to consider such a program and lists the pros and cons for each. The memo also notes topical areas for consideration such as NYSE and Nasdaq shareholder approval requirements, ISS’s position on these programs, U.S. accounting treatment, U.S. tender offer rules, SEC disclosure rules, share registration considerations and tax treatment.