(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
Employees of Microsoft have had to declare themselves personally bankrupt as a result of the option party in the company. So far, 25 employees have declared themselves bankrupt.
What was supposed to be a lucrative good for the company's employees has turned out to be a serious boomerang – just as opponents of options for employees – instead of a proper salary – warned against.
At one point or another, they exercised the option right and acquired shares in Microsoft. The IT industry was at its peak, and so was the euphoria.
But trading options in shares entailed a fairly significant tax hit due to the extra income it generated. Many borrowed money to pay the extra tax, against security in the shares.
This high-risk practice is often used by speculators to finance the acquisition of even more shares; shares that they do not have clean money to pay for. But for the Microsoft employees, the drop in share value led to the shares being sold to cover the loans they had. Thus the money disappeared overnight; from 1.5 million dollars in shares one day to no shares and a debt of up to one hundred thousand dollars to the tax authorities – or broker/bank – the next day.
The employees of Microsoft are now accusing the broker, Salomon Smith Barney, of having pressured them to trigger the option agreement. An employee says he was told that he had to convert the option into shares because otherwise the family would not inherit anything if he died.
But Microsoft has in its option agreements that these should pass on to the family if the employee dies. The man therefore feels cheated, both because he was pressured to borrow money against the shares and because the broker raked in between 60.000 and 80.000 dollars in interest income each year while the loan of 800.000 dollars ran.
whether Salomon Smith Barney has breached good business practice.
They themselves say they don't have that, but the experts obviously dispute that.
