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The Employee Ownership Update

Corey Rosen

June 30, 2005

(Corey Rosen)

Employee Attitudes Toward Stock Options: An NCEO Survey

A new NCEO study provides insights into how employees perceive stock options. The research was partially funded by Watson Wyatt & Company and was conducted by Katherine Klein of the Wharton School of Business, along with Archie Bates, Anuradha Ramesh, and Ed Carberry (Katherine and Ed are both former NCEO employees).

The study faced a major hurdle in that it was conducted primarily during 2002, a time when many companies were facing declining stock prices and uncertainty about future equity plans. Consequently, it was very difficult to get companies to agree to participate. The study has two parts, one on public companies and one on private companies. The public company data analysis is now being completed.

The sample consisted of eight diverse companies with 1,176 responding employees, with a range of 33 to 301 respondents per company. A series of indexes was created based on multiple questions probing organizational commitment, ownership behavior (thinking about what can be done to improve company performance, checking stock values, and seeking out information on the company), satisfaction with options, expected financial benefits from options, the belief that individual performance is fairly rewarded with options, perceived understanding of options, and various measures of how well the employee expects to do because of the options.

The table below looks at responses to some of the some of the key questions we asked on motivation and understanding:
It is exciting to receive stock options in this company67%13%
Stock options are over-rated as an employee benefit 34%37%
My options will provide me with substantial financial gains30%35%
The better my performance, the more stock options I will receive32%38%
I would feel comfortable explaining how stock options work56%29%

Innovative Plan for Encouraging Employee Ownership

In the U.S., it's common for companies to provide employee ownership as a benefit. Outside the U.S., executives in most countries strongly dislike that idea. They want employees to buy stock. But how can employees do that if they have limited discretionary income? Dexia, a Belgian multinational financial holding company, has solved the problem by creating a plan in which employees who buy one share can borrow money to buy nine more. At the end of five years, if the stock price has declined, they get their money back. If it goes up, the lender gets some of the shares (enough to cover a pre-agreed rate of return), while the employee gets the one share plus however many additional shares remain. The result has been 80% participation in Belgium and France, Dexia's main locations, and 60% elsewhere, very strong numbers for stock purchase plans (quite a but higher than conventional discounted plans, for instance, even those with option features). Dexia now has set up a consulting division to sell the plan to other companies.

Capturing Work Supports and Resources for Low Wage Employees and Owners

Low wage workers may be eligible for a number of major federal and state work support resources such as the Earned Income Tax Credit, Food Stamps, State Children's Health Insurance Program, Medicaid, Child Care, Housing assistance, etc. Receiving benefits for which they are eligible can result in families receiving thousands of dollars of additional to help meet their pressing family needs each year, and can contribute to job retention and employment stability. However, many of these benefits are underused, because both employees and employers may be unaware of them or unfamiliar with how to apply. The effect is that employees who experience financial distress often leave their job, resulting in low job retention rates and extra costs for the business.

The Charles Stewart Mott Foundation is funding a national research project to identify promising practices among employers and their networks in helping low wage workers access work supports. Promising approaches are emerging where employers, employer networks, and community development intermediaries are working together to help low wage workers receive these benefits. The project is especially interested in employee owned businesses who are interested in helping their employees access these benefits.

For further information about what employers can do, or to share information about current experiences, please contact Abbey Frank or Mark Greenberg at the Center for Law and Social Policy at (202) 906-8000, email or, or Bob Zdenek, national co-investigator, at (301) 263-2715, email The group will publish a national report on innovative practices and will share this information with NCEO.

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