New Survey Reveals Option Plan Changes in 2003

A newly released survey from Sibson Consulting and WorldatWork of 336 publicly traded companies shows that eligibility for option awards dropped from 37% of nonexempt employees in 2002 to 27% in 2003. For sales staff, 67% of employees were eligible in 2002, compared to 57% in 2003. Managers, professionals, and executives retained the same percentage of eligibility. Being eligible for an option does not mean an employee gets a grant, however. Historically, about half to two-thirds of eligible non-management employees actually receive grants.

The decline in eligibility, as well as changes in market values, largely explains a decline in options value of 20% or more in 29% of the companies for nonexempt employees and a 5%-19% drop in 11% of the companies. But the value of options for nonexempt employees remained the same in 27% of the companies and went up in 20%. A similar pattern obtained for sales, professional, and management staff. At the executive level, 47% of the grants kept the same value, with somewhat more decreasing than increasing.

The market's recovery, plus the common practice of issuing options regularly to smooth out stock price volatility, led to only about 17% of the companies having 75% or more of their options underwater, and another 17% with 50% to 74% underwater. Even in strong markets, about a third or more of options are underwater, so these data reflect a move back to more typical times for option values.

The study, The State of Stock Options 2003, is available for $29.95 from WorldatWork (www.worldatwork.org).