Stock options, once the undisputed king of long-term incentives (LTIs), continue their fall from favor, even (perhaps particularly) in technology and life science companies. Results from a recent pay practices and policies survey published by Culpepper reveals that companies in these sectors continue to shift away from plans focused solely on stock options towards plans using a mix of multiple types of LTIs.
Blame the change in accounting rules (whereby companies are now required to expense options), the backdating scandals and declines in the stock market for pushing us toward the more balanced practice that we probably should have been following all along. Only 59% of the companies surveyed no offer stock options to employees; only 17% are relying on options as their sole LTI vehicle.
The trend doward diversification of LTIs, as evidenced by the Culpepper study results is illustrated in the chart below.
Creative Commons Photo "Regret" by Bruce Funston