IBM will end a stock option scheme and replace them with a doubling of cash compensation.
Big Blue will end the annual practice of issuing 4,000 IBM stock option grants to the 12 of its 13 directors who are not IBM executives and instead double their annual retainers to $200,000.
The only director to continue to receive stock options will be IBM chairman and CEO Samuel Palmisano, whose compensation package is negotiated separately.
The change in policy is part of a continuing move away from stock options compensation, said an IBM spokesman. "We believe it's sound governance to take this step," he said.
The move away from stock options grants throughout the company is driven in part by accounting regulations which took effect in 2005. They make public companies count stock option grants as expenses in the quarter in which they are granted. Doing so diminishes earnings and can adversely affect a company's stock price. Shifting away from stock options reduces the impact of the expensing requirement, said the spokesman.
IBM has also moved away from stock options because its competitors have been doing the same. "We found, as we did benchmarks with our competitors, a greater reliance on cash compensation," he said.
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