Future of Proposed NASD Restriction on Employee Stock Option Plans Uncertain

A proposal to give shareholders veto power over stock option plans at publicly traded companies is generating a heated debate and facing a tenuous future now that a key proponent, Securities and Exchange Commission Chairman Arthur Levitt, is less than a month from retirement.

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Levitt has asked the National Association of Securities Dealers, which owns the Nasdaq, to adopt the type of rule proposed by the New York Stock Exchange that would require companies to seek shareholders' blessing before awarding employees options grants.

The new restriction, Levitt has argued, would keep the large options grants that companies increasingly are including in pay packages to lure and retain workers from diluting overall share value at the companies. The concern is that employee stock options, often priced well below the market price for securities, drive down the market price when employees exercise them. ...