Bubble Lives on at Broadcom, Where Options Still Rain Down

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JUST when you thought you had seen the most outrageous transfer of shareholder wealth to executives through stock options, along comes a company that tops them all.

The Broadcom Corporation, a maker of integrated circuits for broadband digital data transmission, went public during the bubble in the late 1990's. The bubble has never burst for Broadcom management, judging from the option plan that the company wants shareholders to approve at its meeting on April 29.Your first clue that stock options play a leading role at Broadcom is that its board has a committee devoted to them. Members of the option committee are Alan E. Ross, the company's president and chief executive; Henry Samueli, a company co-founder; and Werner F. Wolfen, president of Capri Investments, an investment advisory firm.

Proving just how serious its work is, the option committee met 25 times in fiscal 2003; the full Broadcom board held 18 meetings in that same time.

Broadcom shareholders are being asked to vote on a company proposal to increase by 12 million the number of shares authorized for grants under its 1998 stock incentive plan. In addition, a "yes" vote will expand the types of stock awards that the company can offer executives and employees, as well as grant the compensation committee the right to reprice underwater options at any time. This objectionable repricing practice removes the risk for executives and employees that outside shareholders incur when their stock falls.

Glass Lewis & Company, an institutional advisory firm in San Francisco, is urging shareholders to vote against the option plan because of its monster price tag. The plan's cost is equal to 12.2 percent of Broadcom's enterprise value, Glass Lewis said, and would dilute existing shareholders' interests by 3.7 percent if put in place.

Had the proposed plan been in place last year, it would have cost shareholders an amount equal to about 75 percent of the company's revenue, the firm said.

http://www.nytimes.com/2004/04/18/business/yourmoney/18watch.html