Options Trading Tutorial

Do employee stock options count as votes in a shareholder vote?

For example, say a shareholder vote is upcoming to approve a corporate merger. The merger requires a majority (>50%) of shareholders to approve the merger. Looking at the most recent 10-K, it appears that management and other insiders hold 52% of outstanding shares. #1 - Executives/management can vote their shares just like the rest of common shareholders correct? #2 - On closer inspection, the 52% owned by management is made up by a majority of employee stock options vs. stock actually held. Some of the options are fully vested, some are not. Do these options count as a vote as well? But these options count towards shares outstanding correct? So for the purposes of voting, is the shares outstanding reduced? Couldn't executives just choose to vest their options right before the vote? To further clarify: If shares outstanding is 17m, but 1m of those include are stock options held by top executives of the company, then really there are only 15m 'votable' shares. Is that correct?

Public Comments

1. You have to be the listed owner of the stock to have a vote. Having an option to buy the stock (a stock option) does not entitle the owner of that option to vote.
2. the option gives you no rights as a shareholder - because you are not a shareholder until you exercise the option and buy the stock
3. No...don't confuse shares that have not been issued with those that have. Options have no vote. Shares, regardless of who owns them, do. But...pay attention to who owns them; control may be an issue. An ESOP plan (administrator) may control -- have the proxy -- to vote the shares if the shares are not registered in the name of the individual shareholders (employees). Warrants have rights when issued although the particular rights (1) may be subordinated or (2) separate from the rights of the common shares. (Warrants are derivatives that, like options, may be issued to employees. They are different in that they are often vested at issue with particular rights with regard to corporate actions)