Pay Me in Stock Options: Manage the Options You Have, Win the Options You Want

by Carol E. Curtis

• ISBN13: 9780471038344
• ISBN10: 0471038342
• Format: eBook
• Copyright: 2002-03-01
• Publisher: Wiley

Summary

A comprehensive guide to taking full advantage of current employee stock options plans The phenomenon of stock options as employee compensation continues to grow in importance in more and more online and traditional businesses. In fact, an estimated eight million Americans-some eight percent of the workforce-currently hold options, in comparison with only a million workers back in 1992. Yet many people don't know how to take advantage of these plans and are unsure when to exercise their options or how to negotiate to get more options. This much-needed book helps employees and management understand how options plans work in order to use them to their best advantage. Here are specific strategies on vesting schedules and tax implications, along with real-life examples from plans that readers can learn from.

Table of Contents

Preface	xi
Acknowledgments	xv
Part One---The Rise of Stock Options
Chapter 1	3	(7)
We Have Seen the Future, and It Is Stock Options	3	(7)
Chapter 2	10	(11)
The New Corporate Hero	10	(11)
Waste Industries	10	(2)
Lonnie Poole
Intel	12	(2)
Craig Barrett
Andrew Grove
Starbucks Coffee Company	14	(2)
Howard Schultz
Cisco Systems	16	(2)
John T. Chambers
The Next Generation: Eric Kuhn, Varsity Books.com	18	(3)
Part Two---Stock Options in 10 Easy Lessons
Chapter 3	21	(11)
Stock Option Basics	21	(11)
What Is a Stock Option?	21	(1)
Example from Real Life: Mellon Financial Corporation	22	(1)
Different Types of Options	23	(1)
How Was the $10 Grant Price Determined?	24	(1)
How Was the $20 Market Price Determined?	24	(1)
Beware of Insider Trading Rules	25	(1)
Who Decides How Many Options You Get?	25	(1)
What Is Stock, Anyway?	25	(1)
Public and Private Stock	26	(1)
What Is Your Company's Stock Worth?	26	(1)
Common and Preferred Stock	27	(1)
What Kind of Stock Do You Have?	28	(1)
Stock Options and Your Company	28	(1)
Dilution	29	(1)
Key Points	30	(2)
Chapter 4	32	(15)
Different Types of Options, How They Work, and How They Are Taxed	32	(15)
Example from Real Life: Tim Byland	32	(1)
What Are Nonqualified Stock Options (NSOs)?	33	(2)
What Are Incentive Stock Options (ISOs)?	35	(2)
The Alternative Minimum Tax (AMT)	37	(1)
AMT Rates	37	(1)
NSOs versus ISOs	37	(2)
The Super Stock Option	39	(1)
Special Tax Strategies	40	(5)
Key Points	45	(2)
Chapter 5	47	(12)
Vesting, Expiration, and Valuation	47	(12)
Types of Vesting	50	(1)
Expiration	51	(2)
Section 83(b)	53	(2)
Valuing Stock Options	55	(3)
Key Points	58	(1)
Chapter 6	59	(18)
Exercising Your Options	59	(18)
Focus on Performance	61	(1)
Dollar Cost Averaging	62	(1)
Ways to Exercise	62	(7)
Exercising Outside the United States	69	(1)
Example from Real Life: Mellon Bank Corporation	69	(3)
A Forms Checklist	72	(2)
Key Points	74	(3)
Chapter 7	77	(33)
What Should You Do with the Proceeds?	77	(33)
The Basics	78	(1)
The Plan	78	(3)
An Exercise Strategy	81	(3)
Financial Planning for the Top Echelon	84	(20)
Stock Options and Financial Independence	104	(5)
Key Points	109	(1)
Chapter 8	110	(18)
A Short Course in Asset Allocation	110	(18)
Wall Street's Favorite Statistic: 93.6 Percent	111	(1)
The Value of Diversification	112	(2)
The Temptation of Concentration	114	(1)
Which Asset Allocation Is Right for You?	115	(4)
Ongoing Review	119	(1)
Rebalancing	119	(1)
Where Does Company Stock Fit In?	119	(5)
Stocks or Mutual Funds?	124	(3)
Key Points	127	(1)
Chapter 9	128	(17)
The Risks of Options	128	(17)
Risks Faced by Employees	129	(12)
Risks Faced by Companies	141	(2)
Key Points	143	(2)
Chapter 10	145	(6)
Options Overseas	145	(6)
Europe	146	(2)
Japan	148	(1)
Stock Appreciation Rights (SARs)	149	(1)
Key Points	150	(1)
Chapter 11	151	(6)
Other Types of Stock-Based Compensation	151	(6)
Employee Stock Ownership Plans (ESOPs)	151	(1)
Section 423 Plans	152	(1)
Restricted Stock	153	(1)
401 (k) Plans	154	(2)
Key Points	156	(1)
Chapter 12	157	(10)
Avoiding Common Mistakes	157	(10)
Not Knowing What You Own	157	(1)
Cashing in Your Options Too Soon	158	(1)
Keeping Too Much Tied up in Company Stock	159	(1)
Failing to Take Blackout and Lockup Periods into Account	159	(1)
Failing to Account for Taxes in Valuing Your Options	160	(1)
Forgetting about the Alternative Minimum Tax (AMT)	161	(1)
Accepting Stock Options in Place of a Salary	162	(1)
Failing to Learn What Happens if You Leave the Company	163	(1)
Failing to Set Goals and Develop an Overall Plan	164	(1)
Counting Your Options before They Hatch	164	(1)
Key Points	165	(2)
Chapter 13	167	(18)
How to Negotiate for Stock Options	167	(18)
Where Does This Leave You?	168	(2)
An Example from the Old Economy	170	(1)
Knowledge Is Power	171	(1)
If You Already Have Options	171	(2)
If You Don't Have Options	173	(1)
Value of Options	173	(3)
You Get What You Negotiate	176	(1)
A Slice of Life in the Executive Suite	176	(2)
What if You're a Freelancer?	178	(1)
Case Histories from Real Life	179	(4)
Key Points	183	(2)
Chapter 14	185	(24)
Frequently Asked Questions	185	(24)
Stock Option Basics	185	(11)
What to Do with the Proceeds	196	(3)
Basic Financial Questions	199	(5)
Your Personal Finances	204	(5)
Appendix A	209	(10)
Risk Tolerance Questionnaire	209	(10)
Appendix B	219	(2)
Selected Stock Option-Related Web Sites	219	(2)
Notes	221	(4)
Glossary	225	(22)
Index	247