Stock Plans Holding Up Despite Downturn: Schwab

November 10, 2009 (PLANSPONSOR.com) – One might think that depressed equity markets, rising unemployment, and shifting accounting treatments would have weighed on stock option issuance.

However, a new study of 200 corporate stock plan decision makers from companies around the country commissioned by Charles Schwab found that most employer respondents are offering the same or even more stock plan benefits to their employees since a year ago.

According to an announcement of the survey, one in four respondents (25%) says their company plans to increase stock plan benefits in the next year, while more than two-thirds (68%) plan to maintain benefits at the current level.  

Additionally, Schwab notes that these benefits are not just for senior-level employees:   

• Half (50%) of participating companies now offer performance shares to manager-level employees.
• Nearly half (48%) offer manager-level employees stock options and one-third (34%) award restricted stock to managers.
• More than a quarter offer performance shares (26%) and/or stock options (27%) to employees below the manager level, while 17% award restricted stock to this group of employees.

Benefit Targets

Schwab noted that these plans are targeted more toward existing employees than recruits, noting that motivating employees to support the success of their company (65%) and giving employees a sense of ownership in the company (58%) were most commonly cited as reasons for offering these benefits, whereas just 12% of respondents saw them as a key recruiting tool.  

 Across all employee groups, the survey found today’s most common stock plan offering is stock options, which are options to purchase company stock at a specified price. They are granted by 71% of responding companies, followed by:  

• Restricted stock (64% of responding companies)—stock issued to employees that typically vests over a period of time.
• Performance shares (51% of responding companies)—stock issued to employees based on corporate performance.