A puzzle…

January 5, 2005

Given that its stock price hit a new 52- week low on Dec. 20, it’s certainly curious that newspaper giant Gannett Co. (GCI) would decide to speed up the vesting on millions of dollars worth of stock options, particularly since the options — the overwhelming bulk are at $87.33 a share — are currently underwater. In its 8-K filed last week, Gannett didn’t explain why it decided to make the change. But several other companies, including hospital chain HCA (HCA), which also recently accelerated its vesting, said they did it to reduce compensation expenses in future years once new rules on options accounting go into effect this summer. Gannett’s options, which were granted last year and were originally set to vest at 25% a year over a four year period, automatically vested on Dec. 23 when Gannett stock closed at $80.69. For Gannett’s top five executives, the change gives them a chance to buy 530,250 options — all at $87.33 a share — up to three years earlier than they would have been able to. But Gannett didn’t just speed up the vesting for the top dogs. Employees also have the opportunity to buy the underwater options: approximately 3.2 million of the options are ear-marked for “all other employees”.

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