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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek

MARCH 17, 2000 VOL. 26 NO. 10

A S I A W E E K  S A L A R Y  S U R V E Y  2 0 0 0
The Road To Riches?
Stock options are no guarantee. And a quick guide to cashless collars and other terms

If you're lucky enough to receive stock options, how much luck do you need to manage them? Should you exercise - buy them - now? Or assume that the price will go up and wait? Here's what Norman Chan, a director with the Hong Kong office of Allen Perkins, a financial services consultancy to individuals, recommends: "I tell clients to exercise at least some of the options as soon as they become available." For the time being, Chan sees options as popular - at least in Hong Kong - in the same way a lottery ticket is popular: "It's just a gambling mentality." He thinks that will change only if investors start to reward companies based on bottom-line performance

1. At your annual salary review at Asian Kiosks Inc., the boss says you've done a good job - but there is no money for raises. You suggest the company issue stock options instead

2. After studying the idea, the board of directors implements a stock-option plan for mid-level execs and up. The company changes its name to e-CyberKiosks! (ECK!).

3. You get 1,000 options plus an additional 1,000 as a bonus (after all, it was your idea in the first place). After one year, you can redeem them at an exercise price of $10 a share

4. One year later, and it has been a good one for ECK! Sales and profits are up, and the stock price is now $45. The spread on your 2,000 shares would net you $70,000 if you exercised your options and sold the stock. But you've heard about a big deal in the works that would push the stock even higher. You decide to wait

5. Your only daughter decides she wants to go to university after all - at an exclusive, expensive overseas school

Cover: Stock Options
Still relatively rare in Asia, companies are likely to start giving employees equity as an incentive to work better and stick with the job. Thank the Internet
• Glossary: A quick guide to cashless collars and other terms
• Japanese Dream: It isn't hip to be a salaryman

Asiaweek Salaries Survey 2000
Jobs in the region and how much they pay

Taiwan: The race for president is too close to call. Whoever wins, the island and its relations with Beijing will never be the same
• Interview: Chen Shui-bian does not want war with China
• Black Gold: Of gangsters, vote-buying and political corruption
• Geopolitics: The influence of Taiwan's brand of democracy
Thailand: What the Senate election means for political reform
Malaysia: Behind a debate on special privileges for Malays
East Timor: Why Falantil members are now rebels without a cause
Viewpoint: Vajpayee masks the fundamentalist threat

The Net: A geek summit in Taiwan
Computing: Hong Kong's hidden software industry
Cutting Edge: Simulating real life

Cash: With $1 billion, San Miguel goes shopping
Marketing: Notebooks as status symbols in Asia
Interview: Krung Thai Bank head says changes are coming
Investing: Mining resource stocks for profit

People: A*Mei drops pop for the classics
Entertainment: The hot spot for survival docu-dramas
Health: Protecting against Alzheimer's disease
Newsmakers: Zhu Rongji lays down the line
Looking Back: Mourning South Korea's President Park

6. The next day, your youngest son comes home from the dentist and says he needs braces. You're ready to cash out

7. The day before you plan to exercise your options, Internet giant Whoopee! says it will set up a series of electronic kiosks - competing directly with ECK! The stock plummets

8., an Internet start-up, calls trying to poach you from ECK! They're offering - what else? stock options. You decide to stay where you are

9. ECK! buys AcmeTel. This is the deal you've been waiting for. The stock soars

10. A major brokerage issues a report which concludes that your company's prospects are bright even with Whoopee! in the same market. The brokerage says that ECK! shares have a strong upside, but you decide to be contrarian and sell. Plus, you need the money

11. You cash out, help your daughter with tuition, pay for the braces - and buy a new SLK. You're ready for a new set of options

The Guide
CLICK HERE for Asiaweek's Salary Survey 2000, ranked by country and by position

Know Your Options

CASHLESS COLLARS Using put and call contracts to lock in the value of stock options before they mature. Usually recommended only for high rollers

CASHLESS PURCHASE When options are simultaneously exercised and the stock sold. No cash from the option-holder is needed. Companies sometimes do this for the benefit of employees

DILUTION What happens to the underlying value of shares after new shares are created and issued. If total capitalization doesn't change, additional shares mean each one is worth less, which is why existing stockholders at times oppose options

EXERCISE PRICE The per-share price at which you are able to buy your options. Usually but not always the market price at the time the options are awarded. Sometimes referred to as "strike price" or "grant price"

EXPIRATION DATE Options are typically granted for a set period. They often must be exercised in 10 years - or lost

INCENTIVE STOCK OPTIONS When the exercise price is set higher than the market price at the time of the grant to add incentive to improve shareholder value

INDEXED STOCK OPTIONS Options that fluctuate in value depending on how the holder's company performs against a peer group or market index. They aren't popular in a bull market where they can limit the upside but can be valuable if your company outperforms the benchmark

PHANTOM STOCK When a company credits employees as being owners of shares that don't actually exist. He or she is later credited with the difference between what shares were worth when granted versus when they are cashed in

REPRICING The practice of changing the exercise price if the overall market falls and renders options worthless. Tends to anger existing shareholders

SPREAD Difference between the exercise price and market price at time of sale

VESTING PERIOD The amount of time an employee must wait before exercising his option

This edition's table of contents | Asiaweek home


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