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How to Create a Communication Strategy For Underwater Stock Options

How to Create a Communication Strategy For Underwater Stock Options

by Frank Roche on January 9, 2009

in Executive Compensation, Pay, Underwater Options

Employees own a lot of underwater stock options. Estimates run from 93-100% of employees who work for companies in the S&P 500 have underwater options. Sure, times are tough, but the purpose of employee stock options is to attract and retain great talent. How’s that working in this economy?

Here’s what not to do: Be silent about what’s happening with underwater options. It’s the elephant in the room that everyone tries to ignore. But now’s not the time to play ostrich to that elephant. It’s time to communicate. And HR — especially Compensation — this one’s for you.

How to Create a Communication Strategy for Underwater Stock Options

  1. Ask why you granted stock options in the first place. If those reasons — competitive practice, opportunity, ownership, motivation — were valid then, they’re valid now.
  2. Develop the Big Idea. What is the unifying theme about having an ownership stake in the company now?
  3. Boil the Big Idea down to a one breath. If you can’t tell employees what owning a piece of the pie means in a single breath, you can’t do it in a thousand. Get your story straight.
  4. Get to critical employees first. In bad economies, those who can leave do leave if they think your chances of success are slim. There has to be a payoff. Talk to your critical talent first.
  5. Talk straight. This is no time for HR-speak about how people are our most important asset. Your communication strategy needs to be straight at the business messages and what the company is doing to be successful. That includes talking about what you’ll be doing with underwater options in the future.

Those five steps will get you pretty far in talking with your employees about underwater stock options. Successful companies do it right when they’re out there talking about what ownership and engagement means when it’s tough. It’s easy to send out grant letters when options keep paying off — it’s another thing entirely to talk about underwater options. But ignoring them won’t make them go away.

Coming Next: 10 Tips to Create a Successful Underwater Stock Options Exchange

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