Hewitt Study Says Option Use Will Drop in Large Companies

A survey of 202 large US companies by HR consulting firm Hewitt Associates has found that 34% plan to decrease the proportion of employee compensation represented by options and other company stock, while 52% plan to keep the level the same, and 14% plan to increase it. At the same time, companies are increasing the use of discounted or no brokerage fee stock purchase plans. Twenty-eight percent of the companies plan to increase their use, 16% will keep them at the same levels, and 56% will maintain current usage. The study also found that employers are increasing their education around company stock issues.

The shift to discounted purchase plans, such as Section 423 plans, makes sense in a volatile market. These plans typically allow employees to buy stock at a discount off the price at the beginning the of a "purchase period" or the end, whichever is lower, with purchase periods usually between three and 27 months, depending on the plan. Employees put money aside out of payroll deferrals during the purchase period, and can choose not to buy stock at all and get their money back. These plans provide less risk for employees in that it guarantees at least some benefit from stock ownership.

The study's complete results are available only to those taking the survey.