While stock options may be the typical “go-to” form of employee incentive, a company may have reason to seek alternatives. Many employers provide employees with equity-based compensation such as stock options or restricted shares, but often employees are not receiving the value these incentives were intended to provide. In other cases, a company may want to avoid granting actual equity or supplement equity awards with additional incentives. For any of these reasons, employers should consider new approaches to help retain employees and reward performance.
Generally, employees only see benefits from stock-based compensation when their companies go public or are sold. Many employees, however, never exercise stock options, a February report by Schwab Stock Plan Services noted. Only half of stock compensation program participants were confident about making the right decisions about their plan, Schwab found. Employers’ concerns about whether employees value stock options could be a reason that their use has declined in recent years, according to a 2017 report from FW Cook.
This article first appeared in Law360 on October 29, 2018. (subscription required to access article)Click here to view the full article