New Data Show Broad-Based Option Plans Decrease Employee Turnover

Three researchers at the Kenan-Flagler Business School at the University of North Carolina found that broad-based stock option plans in public companies reduce employee turnover, especially where industry returns are increasing. The study, "The Option to Quit: The Effect of Employer Stock Options on Turnover Intention" by Serdar Aldamatz, Paige Ouimet, and Ed Van Wesep, found that turnover over three years is lower in broad-based plans, even when controlling for comparison companies without these plans. The most dramatic effect is among companies in high-performing industries. Unlike their peers, firms with broad-based stock option plans do not realize higher turnover during periods of strong industry stock market performance because it is exactly at these times when such plans are most valuable. In industries with a 10% over-performance, for instance, broad-based options reduce turnover by 20%, relative to averages. There is a positive effect even in weaker performing industries, but it is small.