78%
of
FTSE
100
companies’
employee
share
options
are
worthless
[1]
26.5%
- Is
the
average
increase
in
value
required
for
options
to
be
worth
exercising
[2]
Over
a
quarter
of a
million
employees’
share
options
are
worthless
49.2%
increase
in
value
required
-
Share
prices
in
the
Financial
Services
sector
need
to
double
before
employees’
share
options
would
be
worth
exercising
40.3%
increase
in
value
achieved
-
Despite
the
stock
market
collapse
employees’
share
options
in
the
Pharmaceutical
sector
are
worth
exercising
International
legal
practice
Norton
Rose
LLP
has
published
the
results
of
their
study
which
provides
the
first
hard
evidence
of
the
effect
the
stock
market
downturn
is
having
on
employees
who
participate
in
share
option
schemes.
The
Norton
Rose
LLP
study
focused
on
Save
As
You
Earn
(SAYE)
share
options
granted
by
FTSE
100
companies
from
2005
to
2007.
The
prices
employees
have
to
pay
to
exercise
their
options
were
compared
with
the
current
share
prices
as
valued
20th
November
2008.
The
conclusion
is
that
a
majority
of
these
options
are
currently
not
worth
exercising
because
they
are
“underwater”
(i.e.
the
exercise
price
is
above
the
current
share
price).
According
to
official
HMRC
statistics,
between
500,000
and
600,000
SAYE
options
have
been
granted
annually
since
2005.
Assuming
that
FTSE
100
companies
are
a
broad
representative
sample,
this
suggests
that
approximately
230,000
options
granted
in
2005,
330,000
in
2006
and
430,000
in
2007
are
now
underwater.
David
Cohen,
head
of
the
employee
benefits
group
at
Norton
Rose
LLP
commented:
“These
results
overall
are
depressing.
Especially
bearing
in
mind
that
most
of
these
options
would
have
been
granted
at
an
initial
20
per
cent
discount.
The
silver
lining
is
that
employees
can
abandon
worthless
options
and
simply
pocket
the
tax-free
bonus
on
the
linked
savings
contract.
The
more
fortunate
will
also
get
the
opportunity
to
apply
for
new
cut-price
options”.
“As
we
would
have
expected
our
research
confirms
that
the
further
back
the
share
options
were
granted
the
higher
the
likelihood
that
they
are
worth
exercising
and
the
higher
the
gain.
There
are
grounds
for
hope
for
employees
granted
share
options
in
2005,
with
58%
in
the
money.
However,
this
drops
dramatically
to
39%
in
2006
and
just
22%
in
2007.”
The
Norton
Rose
research
also
shows
that
the
later
the
options
were
granted,
the
greater
the
stock
market
recovery
required
to
salvage
any
value.
Options
granted
in
2006
are
underwater
by
an
average
of
just
12.9
per
cent
but
the
figure
for
2007
is a
daunting
26.5
per
cent.
Breakdown
of
sectors
