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The Employee Ownership Update

Corey Rosen

November 4, 2000

(Corey Rosen)

New Bureau of Labor Statistics Data on Stock Options

New data from the Bureau of Labor Statistics (BLS) indicate that 1.7% of the U.S.'s 105.8 million nonfarm, private sector employees got a stock option grant in 1999. However, the same report finds that 5.3% of employees in companies listed on stock exchanges received options that year. Current Compustat data indicate that about 49% of the work force is employed by public companies, which would mean that over 2.7 million employees in listed companies alone got options in 1999, or about 2.6% of the total work force. The inconsistency of the data has no obvious explanation.

The BLS survey was based on a sample of 2,100 establishments around the U.S. (an establishment is any business operation; one company may have dozens, hundreds, or even thousands of establishments under its umbrella). The report found that .7% of employees making under $35,000 per year received options, while 1.5% of those making $35,000 to $45,000 received grants. Almost 13% of employees making over $75,000 got options. Options were more common in the West (2.1% of employees) and Midwest (2.0%), than the South (1.5%) and Northeast (1.1%). Looking at industry, durable goods manufacturing companies gave options to 5.3% of their employees and finance companies 5.1%. Nondurable manufacturers and service companies were at the bottom of the list, well under one percent. Technology companies were not separated out as a category.

The report shows that options are much more common now than in the recent past. A 1993-1994 BLS study showed that in 1994, less than .5% of employees were even eligible to receive options at any time. By contrast, the new study reports that 1.7% actually received options in 1999 alone.

At first glance, the BLS data may seem to contradict NCEO estimates of 7-10 million employees receiving options, but closer examination shows the two estimates are in the same ballpark. The BLS looked only at employees actually getting a grant in 1999; the NCEO estimates are of the number of employees currently holding options. Many option programs provide either one-time grants (about 20% of all plans, with larger companies more likely to do this) or periodic grants on an other-than-annual basis. So an employee might have gotten a grant in 1997 or 1998, for instance, but not 1999. Those employees still has options, but the BLS approach would not count them. Moreover, the BLS estimate of 1.8 million workers getting options appears to be well understated (because their own data show that a million more employees than that get options in public companies alone). If we take the number of employees getting options in public companies in 1999, account for the employees in private companies who are getting options, and then adjust for the fact that, based on current NCEO data, over half of all employees getting options do not get them every year, we come to a very similar number as the NCEO estimates.

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