Education Improves Employee Perception of Stock Options

September 19, 2006 ( - Preliminary findings from researchers at the University of Illinois at Urbana-Champaign and Michigan State University show that personalized stock plan education programs increase the value employees attribute to their stock option awards.

According to the researchers’ report, employees’ perceived value of stock options awards on average were equal to the Black-Scholes cost of those options after the employees completed stock option training. Prior to training, employees on average perceived the awards’ values as about 61% less than the Black-Scholes cost.

The majority (84%) of study participants who underestimated the value of their option awards before training, increased their perceived value after training.

Additionally, the researchers found the training increased the employees’ confidence in their stock option knowledge, as well as their motivation and loyalty. Seventy-four of 118 post-training research subjects said their confidence in their knowledge of stock options was increased.

Respondents also were more likely to say their stock options and restricted stock awards encouraged them to work harder to contribute to the financial performance of their employer and to continue their employment with the company, the report said.

“In today’s competitive business environment employers want to help ensure that their equity compensation programs are well understood and valued by employees to drive their core objectives of employee engagement and retention,” said Rusty Field, Vice President of Ameriprise Financial Education and Planning Services, in a press release commenting on the research.

The research report can be downloaded from here .