Google Creates Marketable Employee Options

Google will allow employees to sell their vested stock options through an arrangement with Morgan Stanley. Only non-executive employees will be given this choice (Google provides equity broadly to employees), and only shares issued since the IPO will be eligible. Existing options will be modified, requiring Google to take a one-time charge to earnings. Once sold, the options will have a term of two years or the remaining life of the options, whichever is shorter.

Employees will be able to sell their options at a price above their current exercisable value because the purchaser will be able to hold the option for an additional period of time. Employees, however, can also choose to wait to exercise for the full length of the 10-year option. Even out-of-the-money options will have some value to buyers.

Google says the plan will make options easier to communicate, provide a better benefit to employees, and possibly reduce the number of options Google needs to issue to provide the same level of incentive. Investor groups have reacted positively.