Technology Executives Drowning in Underwater Options

Stock Options Out-of-the-Money at 90% of "Tech 100" Companies

NEW YORK, Aug. 27 /PRNewswire/ -- High-tech senior executives, along with
employees holding options granted within 10 years of last fall's market
meltdown, are continuing to drown along with their shareholders. A current
survey by executive compensation consultants Steven Hall & Partners reveals
that, as of this July 31st, stock options at 90% of the 100 largest technology
corporations are still underwater, leaving many companies to seriously
question their sunk cost and retentive hold on key executives and employees.
Hamstrung by the inability to reprice options without shareholder approval,
many companies may find top talent affecting their own repricing by jumping
ship to take advantage of new employer option grants at today's much lower
prices.

The percentage of total outstanding options that are underwater varies widely
across the study group, ranging from none at 10 of the 100 companies studied
up to 100% of all options being underwater at 21 of the studied companies.
For the group as a whole, on average 57% of the options held by these 100
companies' top five executive officers were underwater by an average of 42%
based on their options' exercise price.

Even with the recent run-up in the U.S. equities market, significant stock
market recovery of a whopping 73% is still required to bring the average
option just back to break-even level.

"Most technology companies find themselves between a rock and a hard place,"
said Lawrence Robinson, Managing Director, Steven Hall & Partners. "While it
might make sense to award new option tranches at current lower stock prices to
retain and focus employees in a challenging business environment, this is
tempered by the fact that existing shareholders have also suffered losses in
the recent market decline. In addition, granting additional options further
dilutes shareholders' interests and carries an incremental and costly charge
to earnings, while repricing on a value-to-value basis generally reduces
dilution at minimal or no charge to earnings."

The average "Tech 100" company is currently expensing over $48 million on its
income statement for options held by its top five executive officers, based on
an average grant date Black-Scholes value of approximately 42%. While
expensing $48 million, the July 31, 2009 intrinsic value of these options
averaged only $24 million, about 50% of the amount being expensed.

"This is the time when Board Compensation Committees must determine the most
effective and cost efficient pay strategy to preserve key talent," commented
Lawrence Robinson. "In some cases, we find that companies apply a selective
approach by opting to lock-in a limited number of critical contributors and
hoping for the best with the rest." According to Robinson, immediate
solutions for companies in this position include reviewing the corporate
succession plan to identify key talent, determining what incentives are needed
and redesigning compensation programs accordingly. Boards that fail to act
risk opportunistic poaching from their competitors, particularly in the
talent-aggressive technology sector.

About the Study
The study included CEOs and other Named Executive Officers at 100 of the
largest publicly-traded high-tech firms with average revenues of $8.65
billion. Calculations are based on closing stock prices on 7/31/09. All
option holdings were obtained from the most recent proxy statement available.

Contact Lawrence Robinson at Steven Hall & Partners, 858-461-7270 /
lrobinson@shallpartners.com or Michael Sherry, 212-488-5400 /
msherry@shallpartners.com, for additional details regarding the study
methodology and findings.

Steven Hall & Partners is an independent executive compensation consulting
firm with offices in New York and San Diego, serving as outside counsel to
Boards, Compensation Committees and management. The firm focuses solely on
executive compensation, Director remuneration and related corporate governance
matters. Prior to forming Steven Hall & Partners in September 2005, the
firm's principals, Pearl Meyer, Steven E. Hall and Steven Root, served as
Chair, President and Managing Director, respectively, of Pearl Meyer &
Partners which they founded in 1989. For more information please visit
www.shallpartners.com.

SOURCE Steven Hall & Partners

Jill Totenberg, +1-212-994-7363 / +1-917-697-6900 (cell),
jtotenberg@totenberggroup.com, or Candice Warltier, +1-312-587-3105 /
+1-773-991-1210 (cell), cwarltier@scglobal.net, or Michael Sherry, of Steven
Hall & Partners, +1-212-488-5400, msherry@shallpartners.com