New NCEO Survey on Stock Option Plan Design
NCEO founder and senior staff member
In conjunction with TriNet VCO, a venture capital resource company in San Leandro, CA, the NCEO recently conducted a survey on stock option plan design in companies receiving venture capital financing. The study focused specifically on emerging growth companies with venture capital backed financing, annual employment growth rates of 30% or greater, and a professional/technical workforce. The on-line survey was conducted from December 1998 through April 1999 of TriNet clients who have stock option plans. It was designed to mirror the larger 1998 NCEO "Current Practices" study. Of the 187 companies asked to participate in the survey, 31 respondents completed the survey for a 16.6% response return rate. The companies ranged in size from 10 to 200 employees and were from across the US, although a majority (69%) were from the San Francisco Bay Area. The concentration of companies in the Bay Area reflected the client base of TriNet and not necessarily the distribution of venture capital backed companies in the US.
Nearly all of the companies (83%) grant new-hire stock option awards to all of their employees, while the remaining 17% made grants to key employees only. The average value of new-hire awards varied considerably by pay. For employees making between $110,000 to $150,000, the new hire option value (the number of shares of stock underlying the option award times the share price on the date of award) was $110,433; for employees making between $30,000 and $50,000 received awards worth $5,515.
Slightly over half (16) of the companies surveyed use ongoing award programs for their employees. Of those companies that use ongoing award programs, 68% make grants annually and the remainder make grants on a discretionary, quarterly, or other basis. The value of the ongoing awards ranged from approximately 25% to 100% of the new hire awards.
A detailed look at the results of this and the larger 1998 NCEO survey on stock option plan design is contained in the latest printing of our book Current Practices in Stock Option Plan Design.