Due to its dwindling stock price, Sprint Nextel is going to ask its board to vote at its May 11 meeting to approve a value-for-value exchange of employee stock options, a move intended to "revive the retention and motivational value" of options held by employees.
The carrier laid out the plan as part of its proxy statement to the Securities and Exchange Commission. The company, like many others, grants stock options to workers as an incentive to meet key strategic goals. The value of those options is tied to the value of the company's stock price. Sprint said its stock exchange program will affect 33.2 million options that have an average value of $18.28 each. The company's shares closed at $3.79 in Monday trading.
"Similarly, our employees' stock options have decreased in perceived and actual current and potential economic value," the company said. "This in turn means their outstanding stock options are failing to provide adequate performance and retention incentives for our experienced employees and therefore do not achieve our goal of aligning our employees' interests with that of our shareholders. At a time when we need our employees' motivation to be at its peak, the stock options that have comprised a significant portion of their compensation have become demotivating."
The swap program will allow employees to exchange their options for a smaller number that are linked to current stock prices. Employees with options priced between $6.08 and $13.17 could get a single new option for every two old options submitted, and workers with options priced higher than $13.18 could get a single new option for every 4.5 old options.
In its filing, the company also said Sprint CEO Dan Hesse's total compensation for 2009 was $12.3 million, down 21 percent from his 2008 pay package of $15.5 million. Hesse took fewer stock options in 2009. The company has tied its 2010 executive bonuses in part to attracting customers to its mobile WiMAX service.
Sprint execs' bonuses tied to WiMAX
Sprint's plan of attack
Sprint's Hesse commits to Clearwire, hints at new 4G pricing scenario