Monahan 01 Options (5 page)

By the time Jay started kindergarten he could read, print, write, add and subtract. For the first three years of his life his sisters played house with him but when they got bored with that they started playing school. He was their pupil and he soaked it all up. When he graduated high school he was offered a scholarship to the University of Toronto. He completed his degree in business and applied for a scholarship at the Richard Ivey School of Business at the University of Western Ontario to do his MBA. When he graduated from Western he came to work at our company.

Jay was recruited on campus to join our firm in the management trainee program. The MBA recruits would spend equal time over five years in the finance, human resources, research and development, sales, and delivery and support departments. To MBA graduates our company was an attractive place to start a career and it had all the magic ingredients: high tech, public company, management training program, full benefits, stock options,
and
a starting salary of $75,000. Jay’s first rotation was working for Tom James in the human resources department where he mastered the tasks and our computer systems by the second day and was completely bored by the end of the first week. I talked to him about slowing down a little, soaking up the surroundings and learning by listening. He wanted to be the chief operating officer of the company. I told him he had to be there at least three months before he could apply for that job. He thought I was serious. I’ve been working on his sense of humour ever since.

Jay finished his second rotation in Sales and nine months ago he joined the Finance Department to work with Richard Cox, who was wearing two hats as our chief operating officer and chief financial officer. Lately, Jay felt he was doing some useful work. Cox had him working as part of the team on acquisitions and company financings. He also worked almost exclusively with Cox on stock options and materials presented to the board of directors.

My phone rang for the first time that morning. I glanced at my watch. It was eight-thirty. Everyone must be avoiding me.

“Kathleen Monahan,” I answered.

“Kate, it’s Jay. How’re you doing?” His voice was soft and his concerned tone almost starting me crying again.

“I’m okay. We’ll do fine. How’d it go last night? How’s Danny?” I hurried to change the subject.

“He’s coping. His brother and sister are there with him. I told them to call me if they needed anything.”

“I had a message from Ev on my system when I checked my messages this morning.”

“God, that’s so weird,” he said. “What did she want?”

“Nothing. Just said she was looking forward to having a drink with me at the party last night. Jay, I miss her so much already.”

“I know. Everyone around here is going to miss her. I wish she were here right now. Rick Cox has been yelling for an option summary this morning. Have you got any idea when the system’s supposed to be back up? If Evelyn were here I could get a printed copy but I couldn’t find one in her desk.”

“Who cares about stock options and Rick Cox? He’ll probably forget in an hour that he asked you for it. I can see everyone’s going to have a decent mourning period for Evelyn.”

Jay chuckled. I didn’t think it was funny. But he was probably laughing at me, not my comment.

“Who put the bug up Rick’s ass about options?” I asked.

“I think Oakes is on his case. Maybe they’re going to approve some more grants of options at the board meeting.”

Stock options for the executives are the driving force behind recruiting at our company. Options are an incentive, like a future bonus, given to executives when they’re hired. The reward for the executive is when the stock price goes up and they cash in. There’s no mystique to options as far as I was concerned, but it was amazing the number of executives who never understood the value of what they had.

Many executives have come into my office and I’ve had to give them my basic primer on options. Stock options are simply the option for the executive to buy shares in the company. There were always three significant factors I would go over: the number of options granted, the exercise price of the options, and when the options were available for exercise.

The number of options granted varied, depending on the executive, and this was one factor that every executive clearly understood. They knew how many options they had but in most cases, that was the extent of their knowledge and understanding.

The exercise price was the price at which the executive could buy the shares from the company. This price was the closing price of the company’s shares on the stock market on the day the options were granted to them.

In our company, options were usually available for purchase, or exercisable, one year after they were granted.

So, simply stated, if an executive was granted 1,000 options at an exercise price of $10.00, it meant that when the shares were exercisable, he could purchase from the company, 1,000 shares at $10.00 per share. If he elected to exercise (or purchase) those options (shares), he paid the company $10,000 and the company would arrange for the executive to be the registered owner of the shares. He could then turn around and sell those shares on the stock market. If the shares were trading at $15.00, he would make $5.00 a share, or a $5,000 profit. Definitely not rocket science.

Usually, top executives were granted 100,000 options when they were hired and depending on their performance, more options were granted each year. Several of our top executives were holding over 500,000 options. Most of them had exercise prices between $8.00 and $10.00. The shares were trading at $11.00, so there wasn’t a lot of money to be made right now.

There was a time about three years ago when the shares had reached $16.00 on speculation that we were being taken over but because of insider trading rules none of the executives could ‘cash’ in. Harold Didrickson had informed everyone that there were ‘windows’, or time periods, when it was legal to exercise their options. At the time the shares skyrocketed to $16.00, our audited quarterly financial statements were in the process of being finalized. Our executives knew about the financial results and the public didn’t, so that was considered a closed ‘window’ because they were in possession of inside information, and therefore, it was illegal to trade in the company’s shares.

Options are an incentive to the executives to make sure the company grew and made a profit. The executives understand the word incentive, but profit is a word we’re still looking for in the company dictionary.

Grants of stock options have to be approved by the board of directors and once that was done, the lists of exercise prices and numbers of options granted are given to Ev to enter into the company’s main computer system. After the information is entered, Ev would be able to tell the value at any given time of an executive’s total stock option package.

Jay would also use the same system to generate reports for Rick Cox on how many options were outstanding and how many options were still available to issue. Legally, the number of options granted cannot exceed more than 10% of the company’s issued and outstanding shares. TechniGroup’s number of shares issued and outstanding was a constantly rising number because each time we acquired another company we would give the owners shares in our company, rather than cash. So with the number of shares constantly rising, the 10% limit was always going up.

“I’m leaving on time today,” Jay said, “and if the system’s not back up to get that report, Rick’s going to have to get it himself.”

“Yeah, right. Rick wouldn’t know where the on/off button was on his computer. The guy’s a techno-phobe. And you can quit your whining, you’ll work until the cows come home. When was the last time you left the office on time?”

“I know, I know. Besides, Rick wouldn’t know how to get into the stock option system even if he figured out how to turn on the machine.”

There were three people who could access the stock option system: Rick Cox, Jay and Evelyn. Rick didn’t know how to use the system and with Evelyn gone, that left Jay to do all the work.

“Well,
I’m
leaving on time today. Call me later if you need any help finding things in Ev’s office.” I hung up.

chapter seven

I got up and walked around my desk and stood in front of the closed door. Time to face the troops. Jackie and Sandra, the two legal secretaries and Jessica and Ken, the two paralegals deserved better from me this morning. As much as I was grieving for Ev, I’m sure they were just as shocked and saddened about her death. They had all worked closely with Ev over the years and would miss her dreadfully. The way I had broken the news to them wasn’t fair. I’m always telling people to suck it in and buck-up so I gave myself a mental thrashing and opened the door. I walked around the partitions into the open-concept area where the four of them had their desks. They must have heard me open my door because all four had their heads down and looked like they were diligently working.

“Hey guys.” Four faces looked up at me. Jackie still had tears in her eyes and Ken looked like he was going to break down.

“I’m sorry for snapping everyone’s head off. You know I’m not good at that stuff. We’re all gonna miss Ev.” I paused and swallowed. “Thanks,” I ended off. Big speech for me. Ranting and raving is more my style. I felt awful and shrugged my shoulders. Jackie smiled at me and I knew it was okay.

I turned around and went and stuck my head in Didrickson’s office. He was sitting behind his massive, antique partner’s desk with the phone stuck to his ear. He was taking notes on a legal pad and punching numbers into the phone. Obviously still checking his voice mail messages. I cleared my throat. He looked up and I motioned for him to call me when he was finished. He waved me in and I wandered over to the window to check out the view. Didrickson had one of the prime corner offices in the executive suite and the back wall of his office was all windows. I placed my forehead up against the window and stared down at the street. The cold glass felt good on my face.

I heard Didrickson hang up the phone and I turned around. He finished writing something and looked up at me. He said nothing.

“I’m fine, and you?” I said.

The man was either the coldest person I’d ever met or incredibly shy. After four years I was still trying to figure him out. On a personal level, he didn’t speak unless spoken to, especially to people ‘below’ him. He never initiated personal conversations and showed little interest in anything except work.

“Sorry,” he smiled slightly, but quickly put on his serious face. “I got your message about Ev. God, this is terrible. Who’s going to look after her work?”

Fucking typical, I thought disgustedly. “Don’t worry Harold. I’m sure we’ll cope. Technically, she died before midnight, so should I tell payroll not to pay her for yesterday?” I deadpanned.

“Take it easy Kate. It’s just that this is a bad time with the board meeting only a week away. There’s a lot of work to be done.” The man had such a heart.

“I’m sorry you’re so shook up about Ev’s death, Harold.” I waited. I wanted to see if he understood my tone because sometimes I felt like I had to hit him with a brick - to him everything was so black and white. When he didn’t respond I decided not to waste my breath on the issue. I changed the subject.

“What do you want me to start on for the board meeting?” I asked.

As Corporate Secretary of the company, Didrickson had responsibility for preparing all material to be sent out to the board members in advance of meetings. This was to allow the board members time to look over the material before they were asked to approve it. Usually the two week period before a board meeting was a mad rush trying to get all the papers together and nine times out of ten we ended up giving the material to the directors at the meeting because we never got our shit together in time. Didrickson took this very personally because when he joined the company he vowed that he would get the process in shape and the directors would always have plenty of time to look over the materials they were being asked to approve. It became an obsession with Didrickson and I think the other departments in the company deliberately sabotaged his efforts just to see him squirm. The worst culprits were the beancounters in the finance department who couldn’t organize a senior citizen’s game of shuffleboard. On a quarterly basis the most important documents the directors needed to approve were the financial statements. And the financial statements were never done on time.

Now, call me kooky, but when you know, on a perpetual calendar until the year 2030, when every financial quarter ends, why is it so hard to plan to have something done
on time
? That’s why Didrickson was sure the other departments were conspiring against him, just to make him look bad. He took it very personally. Sometimes rightfully so, because Harold became the scapegoat every time one of the directors would wake up from his seasonal slumber and realize what he was being asked to approve.

“Draft an agenda and remind me what sub-committee meetings we’re having. You’ll have to do agendas for each of the committees as well. Get the file from last years’ third quarter meeting and bring it in. How are the arrangements for the dinner coming?”

“I’ll check with Vanessa. She’s doing all the meals and looking after the out of town directors. I’ll get some drafts done up for you.”

I left his office and went to the kitchenette. I like to embarrass Didrickson by bringing him coffee. He’s never once asked for one and for that reason, I serve him regularly. When I’m really pissed off at him, I’ll wait until he has someone in his office and I’ll poke my head in and ask him if he wants a coffee. It makes him blush every time. Didrickson is so by-the-book, he would never dream of asking the support staff to do anything personal for him. I grabbed the third quarter board meeting file from last year on my way back to his office. I tossed the file in front of him and very gently placed the coffee on a coaster on the leather-top desk. He looked up at me and turned a nice shade of pink. Gotcha, I thought.