Stock Options on the Decline
For years we have been watching the trends in long-term incentives. As we had predicted, more and more companies are decreasing the use of stock options as a long-term incentive vehicle. Longnecker & Associates has written books on the subject, one of which is entitled “The Power of Restricted Stock” has a new edition out this fall. There are many factors attributing to this trend of decreasing stock option awards: the passing of FASB 123R which created the accounting requirements for stock options; the market crash, when employees lost a lot of value in their options; Say-on-Pay and the demand for more pay for performance vehicles; and many other government regulations. In a recent study Longnecker & Associates conducted of the CEOs of the top publicly traded companies of Texas, it was found that stock options decreased in prevalence by 40% between 2002 to 2012. A recent Wall Street Journal blog post cited a study done calculated that stock options represented just 31% of long-term incentive awards in 2012, and are expected to drop to 25% in the next two years.
You can read the WSJ post here.