US research has shown that backdating was quite prevalent e. This eliminates that need for the worker to purchase the shares before the stock is sold, and this structure makes the options more valuable. Corporate Governance Survey Results. They may also be offered to non-executive level staff, especially by businesses that are not yet profitable, insofar as they may have few other means of compensation. Non-qualified stock options those most often granted to employees are taxed upon exercise. Alternatively, employee-type stock options can be offered to non-employees: suppliers, consultants, lawyers and promoters for services rendered. The following table shows the primary reasons that the surveyed companies cited for granting equity awards, and the percentage of companies that gave each as the primary reason for reasond particular type of stock compensation.
Stock options benefit reasons for employee stock options employees and employers. Along with two basic types of option plans incentive stock options and nonqualified option plansthere is flexibility in constructing plan contents. Although available primarily to company senior executives, stock option plans now often exist for many other employee groups. Formerly the purview of larger companies, small business is now also deriving benefits from offering stock options.
Businesses receive three primary valuable benefits. A stock option is an offer by a company that gives employees the right to buy a specified number of shares in the company at an agreed upon price usually lower than market by a specific date. The employee is under no obligation to purchase all or part of the number of shares noted in the option. The choice is theirs alone and they can normally purchase stock at any point during the time period between the offer and last exercise date.
Most companies are painfully aware of the difficulty in attracting talented staff. Top recruiting firms, like Kelly Services and others, and extensive company sponsored searches seek the best available talent, even during down economies. Offering meaningful stock options both attracts better, more talented employees and helps keep them for the long term. Employers are constantly attempting to motivate employees and generate loyalty.
Stock options are a valuable benefit that companies use to create higher level motivation and dedication. It typically works very well, reports Laurie Collier Hillstrom in her article "Employee Stock Options and Ownership ESOP. Their stock value hinges on company performance, which, of course, is a direct by-product of employee achievement. Historically, stock options create motivation and dedication for all employees involved as they are more invested in the company and its results.
As the cost of all employee benefits continues to increase, companies expand their search for programs that offer high value for moderate cost. Stock option plans often prove to be a strong benefit for employees and cost-effective for companies. While stock options are seldom substitutes for compensation increases, as part of a solid benefit program, they help make employment packages more attractive. The only significant costs to the company are the lost opportunities to sell some stock at market value since employees usually buy at a discounted rate and the expense of administering the plan.
Added to the ability to attract, keep and motivate staff, the cost efficiency of stock options helps many smaller companies compete with larger organizations by offering comparable benefit programs. I have the proven ability to write directly to my audience. Employee Stock Options Explained A stock option is an offer by a company that gives employees the right to buy a specified number of shares in the company at an agreed upon price usually lower than market by a specific date.
Attract and Keep Talented Employees Most companies are painfully aware of the difficulty in attracting talented staff. Create More Dedicated Employees Reasons for employee stock options are constantly attempting to motivate employees and generate loyalty. Cost Effective Company Benefit As the cost of all employee benefits continues to increase, companies expand their search for programs that offer high value for moderate cost.
References 3 How Employee Stock Options Work Advantages of Employee Stock Options Employee Stock Options Defined Resources 1 Employee Stock Options Versus Employee Stock Ownership Plans ESOP About the Author I have the proven ability to write directly to my audience. Photo Credits businessman image by victor zastol'skiy from Fotolia.
Employee Stock Options Tax Reporting -- Introduction
What reasons are there for giving options to all employees instead of just to the there are many reasons to give options to all Employee Stock Options. Stock options benefit What Are the Benefits of Employee Stock Options for reports Laurie Collier Hillstrom in her article " Employee Stock Options and. Feb 20, · Stock Options: Top 5 Reasons NOT to Use Them as an Employee Incentive. wants to incentivize a key employee by giving her stock options.