MSFT in the News
Lots of news about the new compensation plan at MSFT. The fact that employees will no longer get stock options is less interesting than the news that MSFT plans to hand out stock awards just as broadly as options were handed out (in other words, to most employees). I think that most employees will prefer this arrangement.
I tend to agree with the underlying assumption that “options are a really strange way to compensate people”. Stock options in an industry with reality-altering P/E ratios like tech had (and still has to some degree)have always been essentially like lottery tickets (or more cynically, like shares in a now-imploded ponzi scheme). Perhaps I have less angst than others about the portion of my options that are underwater, since I had never convinced myself that options were anything other than a useful hedging tool for money managers and a speculative gamble for everyone else (a view which I feel is well-supported by economic texts but seemingly equally well-ignored by people who hold options, as many interesting lunch conversations attest).
In any case, there is nothing wrong with handing out lottery tickets at review time. But I think that most MSFT employees would now rather have something more predictable. Besides the fact that many employees had(IMO) unrealistic expectations about their options, the demographics have changed. I don’t have hard numbers, but the norm has shifted undeniably from single to married and married to married with young kids. In other words, the risk-tolerance has gone down.
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Seattle PI talks about blogs at MSFT. I think it is a well-done article, and captures the issues accurately.