After the Internet bubble burst in the early 2000s, some 450 U.S. public companies offered programs allowing employees to exchange underwater stock options for something that had value — usually either new options with a strike price at current fair value, a smaller number of shares of restricted stock, or cash.

But don’t expect the same level of activity now, even though the overall stock market is in just as bad shape, if not worse. The restive climate among shareholders and their advisory services likely will produce mostly “no” votes on proposals for so-called repricings, compensation attorneys and consultants say.

“In the last downturn the advisers and attorneys were coming up with all sorts of new ways to reprice options, because clients were demanding it,” said Jim Scanella, a Watson Wyatt consultant. “It’s the exact opposite now.”

That’s not to say there won’t be any repricings. This year there were about 55 through October, mostly at smaller companies, Scanella said, citing a Watson Wyatt database. “There’s some activity, but it’s certainly far less culturally acceptable than [it used to be],” he noted. Most companies, he added, are just looking around to see what everyone else is doing.

Sean Feller, a partner in the compensation and benefits practice at Gibson Dunn & Crutcher, agreed. With companies now starting to think about what proposals to include in 2009 proxies, he’s getting a lot of requests from clients asking about their choices with regard to underwater options. “I think everyone is still trying to figure out where things are going and markets are heading before they take action,” he said. “But they’re definitely concerned about how to keep incentivizing employees.”

Most companies that propose repricings will make executive officers ineligible, in a bid to overcome institutional investors’ current distaste for the exchange programs, Feller said.

However, there were some notable exceptions to that among 2008 repricings. An analysis by White & Case highlighted eight companies with annual revenue greater than $1 billion that completed option exchanges in 2008. Four of them — Builders FirstSource, R.H. Donnelly, Isle of Capri Casinos, and MGM Mirage — allowed executive officers to participate. Isle of Capri even let directors in on the repricing.

“There is a growing trend to include executive officers in repricings,” said Colin Diamond, a partner in the securities practice at White & Case. “It reflects the reality that they often hold a large number of underwater options and that the goals of many exchange programs would be frustrated by excluding them.”

Five of the eight companies — M.D.C. Holdings, Builders FirstSource, Toll Brothers, VMware, and UTStarcom — exchanged underwater options for new options at lower strike prices. Typically in such cases, companies grant a smaller number of options than were included in the original programs, or extend the vesting term, or both.

Isle of Capri exchanged options for restricted stock or, in the case of employees that would receive have receive less than 1,000 shares of stock, for cash. MGM Mirage also switched from options to restricted stock, and R.H. Donnelly shifted from options to stock appreciation rights.

In a recent study of 61 companies that completed repricings since 2005, Aon Consulting said that 46 percent of them exchanged options for options, 49 percent went to restricted stock or restricted stock units, and 5 percent paid cash in lieu of the worthless options (with the amount often determined by an option valuation formula such as Black-Scholes).

Which type of program is selected depends on numerous factors that vary from company to company. But Mark Poerio, co-chair of the executive compensation and benefits group at Paul, Hastings, Janofsky, & Walker, registered a strong preference for restricted stock, in part to guard against the possibility that newly granted options may dive underwater just as the old ones did.

“When an executive is sitting there holding something that has no value, it becomes a morale problem and a retention problem,” Poerio said. “If your stock price goes from $5 to $4, with restricted stock it’s still worth $4.”

On the other hand, Diamond suggested that switching from options to restricted stock awards can create a perception that the company does not anticipate share-price growth in the near term.

Meanwhile, it remains to be seen whether replacement awards adhere to the trend toward more award grants being performance-based. Few have so far, but Poerio said he expects to see more of it in 2009. “If that’s what happens, we might have something that shareholders can live with,” he said.