Mellon Study Says Companies Cutting Back Broad-Based Options

In a Mellon HRIS survey of 108 mostly public companies, 44% of which were technology companies and 19% life sciences companies, 49% of the respondents reported that they make options or similar awards available to most or all employees on an annual basis. Almost all (87%) the life sciences companies do this, followed by general industry (33%) and high technology (31%). Sixty-three percent of the companies have ESPPs, 9% have ESOPs (that figure is 20% for general industry companies), and 51% have 401(k) plans with company stock as one of the investments. Only 13% have no other equity vehicle in addition to their stock options or similar awards.

In response to proposed accounting rule changes, 45% of all companies and 67% of general industry companies would eliminate option eligibility for non-exempt employees. While non-managerial exempt employees would mostly still remain eligible, 40% of the companies say the amounts these employees would get would be much lower. Not surprisingly, executives will suffer no such slings and arrows, and even where option grants go down, companies report something else will take their place for people at executive levels, but not much at other levels. Similarly, companies generally say they will keep their ESPPs, but two-thirds of the companies say they will cut back the discount, the look-back period, or both. The study, "Responding to Mandatory Options Expensing," is available from Mellon by contacting Brett Harsen at [email protected].