In a move that evokes memories of the late 1990s, shareholders of Marsh & McLennan Cos. approved a management plan that will offer them new options for old.
The world’s largest insurance broker and its Putnam Investments subsidiary have been under the shadow of investigations by New York Attorney General Eliot Spitzer. Since last October — when Spitzer accused Marsh & McLennan and its Marsh Inc. insurance broking subsidiary of rigging bids in the insurance market, and favoring insurers at the expense of clients — Marsh & McLennan’s share price has fallen by one-third.
In an amended filing to its proxy, Marsh asked shareholders to approve a plan to exchange employees’ deeply underwater stock options for a lesser number of new options at the current market price. “This would help us to retain key staff, motivate and reward employees for their contributions to our future success,” stated the company, “and reduce a substantial amount of stock option overhang.”
Marsh added that the proposal was designed to meet guidelines of shareholder-advisory firms and institutional shareholders. For example, net shares returned from the option exchange will be retired, reducing the overall number of shares subject to options.
The company’s most senior officers will not be eligible to participate in the exchange offer.
In addition, only outstanding stock options that underwater by 25 percent or more will be eligible for the offer. About three-quarters of the outstanding options meet that criterion, reported the Associated Press.
Marsh stated that the one-time, voluntary exchange would affect up to 5,000 of its 60,000 workers, added the wire service.