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Current Practices in Stock Option Plan Design
Second Edition
by Ryan Weeden, Corey Rosen, Ed Carberry, and Scott Rodrick
$25.00 for NCEO members; $35.00 for nonmembers
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Who gets stock options? How many? How often? And when? Many companies and professional advisors are familiar with how employee stock option plans work, but they lack detailed information on how companies are actually designing and using their plans. This 498-page book describes and analyzes the results of the NCEO's pathbreaking survey of 247 U.S. companies, conducted in the year 2000. The book is the most comprehensive resource available to the public on how companies design stock option plans. It mainly focuses on broad-based stock option plans (i.e., those covering most employees), but also addresses executive-only plans and employee stock purchase plans.
The results presented here allow readers to make comparisons on allocation, vesting, and eligibility issues, as well as on corporate-level issues of dilution, the percentage of total option awards going to certain kinds of employees, the basis on which options are awarded, and other issues. The book provides extensive breakdowns of data by company size, industry, and region. These breakdowns provide overall plan data and also present information for various classes of employees. The results for executive plans and employee stock purchase plans (ESPPs) are presented separately in these breakdowns. Other chapters discuss the data on private vs. public companies, technology companies, companies offering one-time grants, ESPPs at companies with broad-based option plans, and how companies communicate their plans and get employees involved. Finally, the closing chapter summarizes other research in the field.
With its clear summary and analysis of overall results; its detailed breakdowns by industry, company size, and region; and its comparisons of public and private companies, this book is an essential tool for any company or consultant involved with employee stock options or related plans. It is spiral-bound for ease of use.
The results presented here allow readers to make comparisons on allocation, vesting, and eligibility issues, as well as on corporate-level issues of dilution, the percentage of total option awards going to certain kinds of employees, the basis on which options are awarded, and other issues. The book provides extensive breakdowns of data by company size, industry, and region. These breakdowns provide overall plan data and also present information for various classes of employees. The results for executive plans and employee stock purchase plans (ESPPs) are presented separately in these breakdowns. Other chapters discuss the data on private vs. public companies, technology companies, companies offering one-time grants, ESPPs at companies with broad-based option plans, and how companies communicate their plans and get employees involved. Finally, the closing chapter summarizes other research in the field.
With its clear summary and analysis of overall results; its detailed breakdowns by industry, company size, and region; and its comparisons of public and private companies, this book is an essential tool for any company or consultant involved with employee stock options or related plans. It is spiral-bound for ease of use.
Publication Details
Format: Spiral-bound book, 498 pages
Edition: Second edition (April 2001)
Status: In stock
Contents
Preface
How to Use This Book
Overview of the Results
RESULTS BROKEN DOWN BY INDUSTRY, COMPANY SIZE, AND REGION:
Industry
Biotechnology and Medical Development and Manufacturing
Computer Equipment Manufacturing
Semiconductor and Electronic Component Manufacturing
Measuring, Analyzing, and Controlling Instruments
Wholesale and Retail
Finance and Banking
Software
E-Commerce
Professional Services
Company Size (Sales/Revenue):
Less Than $1.1 Million
$1.1 Million-$5 Million
$6 Million-$40 Million
$41 Million-$200 Million
$201 Million-$1 Billion
More Than $1 Billion
Company Size (Employment)
Less Than 31 Employees
31-100 Employees
101-200 Employees
201-500 Employees
501-5000 Employees
Over 5000 Employees
Region:
West Coast
West Mountain
Midwest
South
Northeast
Silicon Valley
PRIVATE VS. PUBLIC COMPANIES:
Private Companies
All Private Companies:
Technology
Non-Technology
West Coast
Northeast
South
Silicon Valley
Public Companies:
All Public Companies
Technology Companies
Employee Stock Purchase Plans
Single-Grant Plans
Plan Objectives, Communication Programs, and Employee Involvement
Previous Research on Broad-Based Stock Option Programs
Appendix: The 2000 NCEO Survey
About the NCEO
How to Use This Book
Overview of the Results
RESULTS BROKEN DOWN BY INDUSTRY, COMPANY SIZE, AND REGION:
Industry
Biotechnology and Medical Development and Manufacturing
Computer Equipment Manufacturing
Semiconductor and Electronic Component Manufacturing
Measuring, Analyzing, and Controlling Instruments
Wholesale and Retail
Finance and Banking
Software
E-Commerce
Professional Services
Company Size (Sales/Revenue):
Less Than $1.1 Million
$1.1 Million-$5 Million
$6 Million-$40 Million
$41 Million-$200 Million
$201 Million-$1 Billion
More Than $1 Billion
Company Size (Employment)
Less Than 31 Employees
31-100 Employees
101-200 Employees
201-500 Employees
501-5000 Employees
Over 5000 Employees
Region:
West Coast
West Mountain
Midwest
South
Northeast
Silicon Valley
PRIVATE VS. PUBLIC COMPANIES:
Private Companies
All Private Companies:
Technology
Non-Technology
West Coast
Northeast
South
Silicon Valley
Public Companies:
All Public Companies
Technology Companies
Employee Stock Purchase Plans
Single-Grant Plans
Plan Objectives, Communication Programs, and Employee Involvement
Previous Research on Broad-Based Stock Option Programs
Appendix: The 2000 NCEO Survey
About the NCEO
Excerpts
From Chapter 2, "Overview of the Results" (tables omitted)
New hire grants are what they sound like-grants made when an employee joins the company. As table 2-5 reports, 35% of these grants are worth less than 50% of the value of each ongoing grant, but many new hire grants are more valuable. Table 2-6 reports the overall results for new hire options.When we looked at variation by industry, size, and region, we found very few consistent patterns. Very small companies were more likely to make new hire grants that were a smaller percentage of ongoing grants than the national norm, with 77% of companies under 31 employees making new hire grants worth 100% or less of the value of ongoing grants, but size was an inconsistent predictor otherwise. Industry also made little difference, although e-commerce companies were about twice as likely as the national norm to make grants worth three times the value of ongoing grants. Southern and Midwestern companies were more likely to make smaller new hire grants than companies in other regions.
Eligibility for new hire grants followed similar patterns to ongoing grants, with almost every category paralleling national norms for who is eligible. Overall, 81% of hourly and 77% of international employees actually received new hire options, but Midwest companies granted to fewer hourly employees (63%) and international employees (50%), as did wholesalers and retailers (56% and 37%, respectively), and very large employers (32% and 52%). Southern (62%) and Northeastern (65%) companies were also more likely to exclude hourly employees. Differences for public and private companies for ongoing grants are mirrored here; the face value of grants is much smaller in private companies, but the number of options granted is much larger in private companies. There was little variation for other categories.
About half the companies use a formula to distribute new hire options to hourly employees, and slightly less (44%) use that approach for sales and technical employees. Patterns of variation here were inconsistent, except for Southern companies, less than a quarter of whom use a formula for these groups, and wholesale/retail employers, who are about one-third more likely to use a formula approach. Discretionary awards account for the other options granted, and mirror the variations reported for formula approaches.
