Broad-Based Stock Options Retain Popularity Despite Market Ills, Enron

It's become commonplace for observers to predict that the rage for broad-based stock option plans that started in the 1990s will yield to pressure from the declining stock market and the general unease over employee ownership caused by the Enron fallout. A new study by Segal Sibson Consulting and WorldatWork, however, suggests that this has not happened. Based on response from 300 companies, there has been no change in the percentage of employees eligible for options across all levels of job categories from part-time staff to executives. In 2000, 28% of part-time employees were eligible for options, while 28% were eligible in 2002; 39% of administrative staff were eligible in 2000, compared to 37% in 2002,; and 58% of technical staff were eligible in 2000, compared to 67% in 2002. None of the differences is outside the realm of random survey variation. While just being eligible for an option does not mean an employee will receive an option, the fact that eligibility remains unchanged is a good indicator that actual receipt of options has not changed much either.

Not surprisingly, technology companies made more employees eligible (50%) than any other sector, followed by general industry (just over 30%) and banking/finance (30%). These percentages do not suggest the average company made 50% or 30% eligible; rather they mean that some companies made most employees eligible, some made a significant minority eligible, and many limited options to executives.

The award of options is somewhat more based on performance than in the past. Sixty-seven percent of respondents said performance played an important role in options awards, and 33% said performance played a more important role than in the past. Few respondents, however, indicated that the decline in the market affected their options policies, just as almost none said Enron did. A somewhat larger number; 22% of the respondents, however, said concerns about potential accounting changes had led them to change options policies. The study's final results will be available in July.