The research indicates a move away from broad-based programmes to more narrowly focused stock option compensation plans, often limited to company executives.
“It is important to note that restricted award programmes are not the only employee benefits being used as a replacement for - or as a supplement to - stock options,” said Lori Crosley, a consultant at Greenwich Associates. “About 48% of companies are also offering performance share-based programmes, and another 15% plan to add them.”
According to Greenwich Associates, US firms have historically used broad-based stock option grants as a way to attract, retain and motivate employees, and to align the goals of the employees with those of the shareholders. Companies began to reconsider this practice after FASB’s ruling. However, the ruling only accelerated an existing shift by companies away from broad-based stock options. “Since 2000 stock options have failed to perform up to expectations, as companies found that awarding them on a broad basis had little positive influence on hiring or on employee retention,” said Crosley.
The week on Risk.net, November 25-December 1, 2016Receive this by email