Broad-based Employee Stock Options in the U.S.: Company Performance and Characteristics

Posted: 29 Feb 2004  

James C. Sesil

University of Wisconsin - Madison - School of Business

Maya K. Kroumova

New York Institute of Technology

Douglas L. Kruse

Rutgers University

Joseph Blasi

Rutgers School of Management and Labor Relations - New Brunswick

Date Written: January 2004

Abstract

While stock options have traditionally been reserved to top management employees, in recent years there has been strong growth of plans making stock options available to a broader group of employees. This paper analyses data on 490 companies with broad-based stock option plans, matched to data from Compustat in order to compare their characteristics and performance to that of other public companies. Major findings are that 1) companies with broad-based plans have higher levels of productivity, Tobin's Q, and employment and sales growth than otherwise-similar firms, 2) average compensation levels are higher among such companies both before and after the introduction of broad-based plans, indicating that stock options appear to come on top of other compensation, and 3) increases in average productivity appear to counterbalance the dilution effect so that average total shareholder returns are unaffected by the introduction of broad-based stock option plans.

Keywords: broad-based employee stock option, performance, productivity

JEL Classification: J33

Suggested Citation

Sesil, James C. and Kroumova, Maya K. and Kruse, Douglas L. and Blasi, Joseph, Broad-based Employee Stock Options in the U.S.: Company Performance and Characteristics (January 2004). Available at SSRN: https://ssrn.com/abstract=502242

James C. Sesil (Contact Author)

University of Wisconsin - Madison - School of Business ( email )

975 University Avenue
Madison, WI 53706
United States

Maya K. Kroumova

New York Institute of Technology ( email )

Kingdom of Bahrain
New York, NY 10023
United States

Douglas L. Kruse

Rutgers University ( email )

Piscataway, NJ 08854
United States
908-445-5991 (Phone)
908-445-2830 (Fax)

Joseph R. Blasi

Rutgers School of Management and Labor Relations - New Brunswick ( email )

Piscataway, NJ 08854
United States
732-445-5444 (Phone)
732-445-2830 (Fax)

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