New Study Shows Options Usage Up for Executives

Then overwhelming conventional wisdom has been that options accounting rules would dampen the use of options for top executives. Maybe not, it turns out. According to a New York Times article (July 17, 2006), a new unpublished study by H. Nejat Seyhun of the University of Michigan based on SEC filings finds the percentage of public companies using options for their top executives has not declined. More surprising, perhaps, is that the average number of options issued in grew 24% in 2005 over 2004, and is higher than any year in the past four. The number of companies issuing options in 2005 on the major exchanges was 3,963, down about 25% from the peak in 2000 of 5,625. But Professor Seyhun says that is misleading because there were simply a lot more technology companies on public markets at that time, and many of them are now gone. In fact, the percentage of technology companies issuing options is exactly the same as it was in 2000.

The study is based on filings with the SEC for equity awarded to top executive officers, so the data cannot be extrapolated to indicate what is happening to options use more broadly within the workforce.