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Options underwater

The bonus that wasn't a bonus

TOP 5 VENDORS (in $000s)

Holcombe T. Green, Jr., WestPoint Stevens


Thomas J. Ward, WestPoint Stevens


John T. Toolan, WestPoint Stevens


George W. Henderson III, Burlington Inds.


Abraham B. Stenberg, Burlington Inds.



V.J. Castagna, J.C.Penney


Floyd Hall, chairman, Kmart


James M. Zimmerman, Federated Dept. Stores


James E. Oesterreicher, J.C.Penney


Gregg W. Steinhafel, Target


With retail and vendor stocks tumbling across the board in 1999, stock options turned out to be a meaningless bonus for a surprisingly large number of executives in this year's survey. As stock prices kept on tanking, those options went "underwater" in Wall Street argot, meaning it would cost more to buy the stock than it was worth. Options are intended to reward strong performance by allowing an executive to buy shares of stock in his own company at cut-rate prices. If you have options to buy stock from the company at $10 a share, and the stock is trading for $30, you make out like a bandit. The problem for many in 1999 was that they had an option to buy at $10, but the stock had sunk to $5. These tables calculate just how worthless those options actually were for many, and what it would cost these executives if they had exercised them. The luckiest man on the list is WestPoint Stevens' Tom Ward. He managed to exercise some of his options before the stock price headed south and cleared $900,000 on the deal. But when the stock price sank, he was still left with a negative balance of close to $1.5 million.

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