Intel to end employee stock options

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San Francisco: Intel Corp. said on Friday that it will stop giving stock options to many employees, ending a decades-long practice that the world's top chipmaker helped pioneer in the early days of Silicon Valley.

Starting in April, Intel will limit stock options to its more senior staff and introduce restricted stock units, essentially grants that are backed by actual shares and vest over a period of years, for other employees.

Some employees will get a mix of options and the new stock units, Intel's head of compensation and benefits, Gaby Thompson said.

"The most senior employees will mostly get stock options. That makes sure that those people are driving company growth," Thompson said.

Intel has used stock options to attract employees since it was formed in 1968, and the company's success helped make the practice popular with other tech companies whose high-flying stocks turned legions of employees into millionaires.

Options give employees the right to buy stock in the future at a predetermined price. If the stock has risen in that time, the employee can pocket the difference. But if the stock has fallen, the employee gets nothing.

But tech shares languished after the dot-com bubble burst in 2001 and many companies, such as Microsoft Corp., began phasing out options in favour of grants or cash bonuses.

"That was something we wanted to continue, but we realized that we could make a couple of improvements," Thompson said.

Shares in Intel fell 20 cents to $26.38 on the Nasdaq on Friday. The stock has risen 15 per cent over the past year and nearly 45 per cent over the past three years.

About 90 per cent of Intel's 1,00,000 employees worldwide now receive stock options, Thompson said. The restricted stock units will be given out in April as part of annual performance reviews.

The shift to restricted stock units will not affect Intel's financial reports and they will be counted as expenses in the same way that options will be when new accounting rules take effect in January, Thompson said.

Intel will also increase cash pay and bonuses for about 30,000 employees who are making the same as or less than their counterparts in the industry, Thompson said.

"We will put more money into the system to move them to the above market position," Thompson said, adding that those increases would come over the next three years.