EBay investors OK employee options exchange

SAN FRANCISCO, April 29 (Reuters) - EBay Inc (EBAY.O) shareholders have approved a stock options exchange program designed to let employees swap "underwater" options for restricted stock units, the online giant said on Wednesday.

The measure was "overwhelmingly" approved by investors during the company's annual meeting, Chief Executive John Donahoe wrote in an email to employees that was filed with the U.S. Securities & Exchange Commission.

EBay proposed the program -- under which employees will swap underwater options for stock at a set ratio -- due to a declining stock price it said had been hammered by the global financial and economic crises. It said the program would help motivate and retain employees.

Stock options provide incentives to employees to work and share in profits, but such options lose value when the market price of the stock falls below the exercise price, which puts them "underwater."

The timing of the program now depended on market conditions, Donahoe said.

EBay had warned it would incur about $142.5 million over the next three years of compensation expenses if the proposal was not accepted by shareholders. [ID:nN10521236]

EBay added it had until April 29, 2010 to execute the program. (Reporting by Alexandria Sage; Editing by Andre Grenon)