The technology sector may be showing clear signs of recovery but 'underwater' options in some of the leading companies are an ever-present reminder of the volatile nature of the business.

For this report, Pinsents analysed the share plan arrangements of the 22 technology companies in the FTSE 350 in 2003 and reveals that, on average, around three quarters (72%) of executive share options granted to Chief Executive Officers were underwater at the date of their year end.

Option plans continue to remain popular, finds Pinsents, but many companies are reviewing and changing their share incentive programmes, for instance by issuing fewer, but more frequent grants, allowing re-testing of performance conditions, and/or adopting co-investment plans.

The report also examines the volatility of the share prices of technology companies, a key factor in determining accounting charges for share options.

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