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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. 

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