Thorn In The Flesh of Venture`s Stock Option

According to the analysis of the general meeting of stockholders, 41 companies registered in Kosdaq have cancelled their previous decision to provide stock options. The number has increased twice from about 20 companies last year. In 1999 when the market was booming, only one company cancelled the stock option. The major reason for the cancellation is the plunging of stock prices. Consequenly, venture companies cannot economize any more by providing stock options.

Simtechs, manufacturer of semiconductor board, had provided 400 thousands of stocks to their 310 employees in 1999 but cancelled stock options at its general meeting of stockholders last March. While current stock price values only 4000 won, the price of stock options is fixed at high 13,000. For this reason, the morale of the employees has gotten lower and lower.

Other venture industries such as OPICOM and Communication Network Interface (CNI) also cancelled stock option for the same reason. Park Young-Do, team director of OPICOM, said that the company was considering to re-provide stock option after adjusting its unrealistic price.

Meanwhile, companies whose stock prices have surged since the first issuance of stock options are having trouble with accumulating allotment since the current law regulates companies to accumulate a portion of the total evaluated price of stock options. When a company provided stock options at the price of 5000 and the price have risen up to 20,000, the company have to set apart a certain amount of money corresponding to the potential payment brought on by the price rise of 15,000 won.

The internet auction company, Auction, is a typical example of this case. Auction had to account the loss of 3.7 billion won for the stock option compensation out of the company’s total operating loss 14.6 billion won. Serome Technology and YTC Telecom also are suffering from the same dilemma.

Lee Keum-Ryong, CEO of Auction, complains that the stock option once introduced to encourage employees, is now a stumbling block of company’s management.

Park Hyeon-Jin witness@donga.com