Compensation and Working Conditions Spring 2001 3

Stock Options

BETH LEVIN CRIMMEL

JEFFREY L. SCHILDKRAUT

Stock Option Plans

Surveyed by NCS

During the year 2000, the Bureau

of Labor Statistics (BLS), as

part of its National Compensation Survey (NCS) program, undertook the second phase of a test study

of stock options granted to workers by

their employers. This survey was designed to collect information on the frequency with which stock options are

awarded (incidence) and on their characteristics (or provisions), such as vesting period and option type.

Data on stock options were last collected under the NCS predecessor

study, the Employee Benefits Survey,

for 1993 and 1994. At that time, fewer

than 0.5 percent of private sector workers received stock options, so BLS

stopped collecting incidence data in

later surveys.

Over the last several years, however,

as a bullish stock market has both

shaped and reflected the economy, interest has increased in the extent to

which employee compensation is tied

to company stock. While equity shares

can play a role in many types of benefits, such as 401(k) plans or employee

stock ownership plans (ESOPs), the

type of equity ownership that has attracted the most attention is stock options. There have been reports of secretaries who became millionaires or

computer analysts who retired before

age 30 due to the value of their stock

options; however, many of these reBeth Levin Crimmel is an economist formerly with the Division of Compensation

Data Estimation, Bureau of Labor Statistics.

Jeffrey L. Schildkraut is an economist in the

same division.

Telephone: Jeffrey L. Schildkraut

(202) 691-6274

E-mail: Schildkraut_J@bls.gov

Using a national sample, the National Compensation

Survey program collected data on the incidence and

provisions of stock options. For the first time, BLS

obtained detailed information on such characteristics as

vesting period and number of shares granted.

ports are anecdotal and have not been

based on extensive research.

Because one of the primary goals of

the NCS program is to collect data that

reflect changes in compensation practices, these reports about increased use

of stock options led BLS to reexamine

this issue. As a result, NCS planned

and implemented a test survey to provide data on stock options from a statistically valid, national sample of establishments.

This article describes the type of

information requested, how the study

data were obtained, and the survey results from the national sample. While

the incidence statistics were disseminated in an October 2000 BLS press

release, this article contains unpublished data on the stock option provisions from that study. This article concludes with a discussion of NCS future

plans for gathering information on

stock options.

The methodology

Data for the study were collected in

2000, with questions limited to stock

option grants in calendar year 1999.1

The questionnaire was mailed to 2,118

establishments in private industry. The

sample estimates cover all 50 States

plus the District of Columbia, including establishments in the not-for-profit

sector of the private economy.2
4 Compensation and Working Conditions Spring 2001

The survey form consisted of 20

questions. Some pertained to the establishment—for example, whether the

establishment was privately or publicly

held, and the number of employees by

salary category. Other questions focused on the nature of any stock option grants made during 1999, with topics ranging from the number of

employees receiving signing bonus

stock options to the name of the department in the establishment that does

the recordkeeping for stock option

plans. Most questions related only to

employees who could not be classified

as owners—defined as proprietors,

partners, and officers who are major

stockholders. However, information

was obtained about the number of

owners in the establishment and

whether they had received any grants.

In addition, one question was asked

about the availability to employees of

equity compensation programs other

than stock options.

Survey methodology was based on

a protocol developed by Dr. Donald

Dillman of Washington State University. This method involves a series of

mailings to respondents in order to

maximize the survey response rate. The

BLS Dallas regional office staff was responsible for the survey refinement,

questionnaire mailing, and followup.

Refinement is the process during which

the location of the establishment is

verified, and a respondent name, telephone number, and address are obtained for the upcoming collection. In

many instances, however, the Dallas

staff obtained the required survey data

during the refinement telephone call.

In these cases, no questionnaire was

mailed. This was particularly true for

small establishments that did not offer

stock options.

Cooperation and data availability

About 77 percent of the sampled establishments reported usable data.

Another 7 percent of the sample was

found to be out of business or out of

the scope (for example, out of the geographic area) of the survey when contacted. The remaining establishments

provided no data or incomplete data.

The sample was selected from a database of all establishments in the private economy in June 1998, the latest

available at the time.

Because BLS expected that the

availability of stock options might vary

based on worker characteristics, some

sort of breakout within the establishment by type of employee was needed.

Because the data were being obtained

via a mail questionnaire, there were

constraints on the number and complexity of categories that could be used.

BLS considered asking for data by occupational group (professional, clerical, and other occupational categories)

or for technology and nontechnology

jobs. Problems with complexity and

relevance across different types of establishments eliminated these options.

Ultimately, data were requested by salary level. Salary is a term understood

by all respondents, and something by

which all employees can be classified.

The following salary breakouts (excluding executives) were chosen based on

data from NCS wage level surveys:

• Less than $35,000

• $35,000 to $49,999

• $50,000 to $74,999

• $75,000 and above

In addition, data for executives were

requested separately.

Although there were few questions

on the interpretation of these salary

categories during data collection, obtaining the data sometimes was a problem due to the fact that establishments

typically do not analyze their payroll

or personnel records based on salary.

Additionally, the salary data and stock

option records often were maintained

by different departments of the company. Therefore, respondents, particularly in the case of larger establishments, could not get the requested

counts without a special computer run.

This problem led to some incomplete

questionnaires from which the data

could not be used.

Comparing survey results

A number of stock option surveys have

been conducted in recent years by various organizations. Because methods

vary so much between surveys, it can

be difficult to compare survey results.

Differences included breadth of survey

coverage, collection methodology, and

definition of terms.

Data from the NCS survey are discussed in the next section. When reviewing the results, it is important to

keep in mind some key attributes of the

NCS data.

The type of businesses covered. BLS

data were collected from establishments, each usually defined as a single

physical location but sometimes considered to be all of the company’s locations in a given geographic area. The

establishment may be the only one

owned by a company—such as a family-owned drycleaner—or it may be one

of several dozen plants around the

country owned by a major manufacturer. Surveyed establishments covered all industries and geographic areas in the United States.

The sample selection. The BLS sample

was selected from the files of unemployment insurance reporters maintained by each State. Establishments

can range in size from zero employees

to thousands of employees. Profit and

nonprofit establishments were surveyed, as well as both privately held

establishments and those that are part

of companies traded on a stock exchange.

Definition of coverage. Only those

establishments responding “yes” to

the following question—“Did the establishment grant stock options to at

least one employee, who was not an

owner, during 1999?”—were counted

as having stock options. An establishment that granted stock options in

other years, or that had a plan in place

but had never actually made a grant,

was not considered to have options for

purposes of the BLS survey. In the

same way, the tallies by employee

would include only those who had received a grant in 1999. Also, other

types of equity compensation such as
 Compensation and Working Conditions Spring 2001 5

Stock Options

restricted stock, stock appreciation

rights, and ESOPs were not counted in

the stock option numbers. (Limited

data on other selected types of equity

compensation are available from the

survey and are discussed later in this

article.)

Incidence results

Grants of stock options were made to

1.7 percent of all private sector workers, excluding owners, in 1999. (See

table 1.) Awards included both signing bonuses and after-hire grants.3 For

employees other than executives, coverage rates ranged from 0.7 percent (for

workers earning less than $35,000) to

12.9 percent (for workers earning

$75,000 or more). Some 4.6 percent of

executives received grants in 1999. The

percent of employees with grants by

major industry group varied from 0.2

percent in nondurable manufacturing

to 5.3 percent in durable manufacturing.

Other key findings included:

• After-hire grants were received

by 1.6 percent of all private industry workers. Because afterhire grants made up the bulk of

total grants awarded in 1999, the

incidence of after-hire grants was

similar to that for total grants

across all characteristics.

• Across all establishments, 1.5 percent of owners received stock

options in 1999.

• In publicly held companies (those

with stock traded on an exchange),

5.3 percent of employees received

grants. (See table 2.) More than

one-quarter of workers earning

$75,000 or more in publicly held

establishments received stock

options in 1999. Publicly held establishments in durable manufacturing showed 14 percent of employees receiving grants, nearly

identical to coverage in the finance, insurance, and real estate

sector (13.9 percent).

• With regard to incidence by establishment, 2.4 percent of all private sector units had stock option grants in 1999. (See table 3.)

For publicly held establishments,

the incidence stood at 22.1 percent. By industry, 4.8 percent of

all wholesale and retail trade establishments had 1999 grants.

The comparable number for services was 0.4 percent. For publicly held establishments only,

more than one-third of those in

finance, insurance, and real estate had stock option grants.

That number fell to 5.5 percent

for publicly held services establishments.

• Stock purchase plans were offered by 4.5 percent of establishments. (See table 4.) Employee

stock ownership plans were given

at 1.1 percent of establishments.

Restricted stock, stock bonus

plans, phantom or shadow stock,

and stock appreciation rights

each were available in fewer than

1 percent of establishments.

Provisions data

The survey, in addition to collecting

data on the incidence of stock options,

attempted to identify information on

the provisions—structure and terms—

of stock option grants. Establishments

that granted after-hire stock options in

1999 were asked questions on plan4

provisions and on other information

concerning stock option grants, such

as accounting practices.

 Provision questions were designed

to identify current stock option plan

practices, plan vesting and option expiration schedules, share allotments,

and costing methods. Survey questions also were asked about stock option grant type, frequency, criteria, and

recordkeeping.

The following analysis reviews the responses of establishments that awarded after-hire stock option grants in

1999. Italicized headings below represent the actual wording of questions

on the questionnaire.

Note that some establishments offered stock option grants under more

than one plan during 1999. Due to the

difficulty in determining whether employees were given stock option grants

under more than one plan, this report

counts each grant recipient as unique.

In other words, if one employee received shares as part of two separate

plans in 1999, he was counted as two

employees receiving grants. In addition, while some of the multiple choice

questions allowed only one answer per

plan, certain questions allowed for

more than one response.

Findings

All of the figures in the following analysis refer to only those employees who

received an after-hire options grant in

1999.

What types of grants were offered in

1999? Nonqualified stock option5

grants (NSOs) were provided to 78 percent of all employees receiving afterhire stock option grants. (See table 5.)

Qualified or incentive stock options6

(ISOs) were provided to more than 31

percent of all employees. Although

multiple responses were acceptable,

the two most common stock option

grant types showed minimal overlap.

 Almost 55 percent of executives but

only 29 percent of nonexecutives received grants with tax advantaged incentive stock options. Establishments

with more than 100 employees provided

nonqualified option grants to nearly 85

percent of all employees receiving

grants. Smaller establishments showed

a more even split between NSOs (63.4

percent) and ISOs (46.9 percent)

granted.

How often were grants made under

each plan? Establishments were asked

about the frequency of grant offers.

Two answers were provided: “Onetime,” indicating that the 1999 option

grant was a one-time event; and “ongoing,” indicating that multiple grants

had been made or were expected under

the plan. Table 6 shows that the majority of after-hire grants in 1999 were for
6 Compensation and Working Conditions Spring 2001

ongoing plans (87.1 percent). One-time

grants accounted for only 12.6 percent

of all responses. Data by salary group,

industry division, and establishment

size showed similar results.

Which of the following criteria was the

primary factor for determining the

number of shares granted in 1999?7

Salary or pay grade was the primary

factor deciding grant size for 52.4 percent of all employees receiving afterhire grants in 1999. (See table 7.) While

individual performance was a key criterion for determining the number of

shares granted for 14.4 percent of all

employees, it was the main criterion for

almost 50 percent of executives. For

54.6 percent of nonexecutive employees, salary or pay grade was the primary grant size factor. Other responses

included a combination of choices or

another primary factor, such as company performance.

After how many years will employees

be fully vested8 in their options? For

all after-hire stock option grants in 1999,

3 years was the average period needed

for full grant vesting.9 Table 8 shows

the average years needed for full vesting, as well as the distribution of establishment vesting periods. The most

common full vesting period also was 3

years (applying to 42.3 percent of employees). Employees may be covered

by cliff vesting, in which case all shares

become vested at one date. Alternately, they may be covered by gradual

vesting, a method under which a portion of shares is vested at each of several intervals (for example, 20 percent

after 1 year of employment, 40 percent

after 2 years, 60 percent after 3 years,

and 100 percent after 5 years). However, the survey question requested

the full vesting period only. The average number of years needed for full

grant vesting was consistent across

salary groups, industry divisions, and

establishment size classes.

How long is the period between the

time the options were granted and the

time the options expire?10 Table 9

shows averages and selected distributions for the number of years between

grant and expiration. Overall, 8.9 years

was the average period before grant

expiration. For all employees, 10 years

was identified almost 75 percent of the

time as the number of years before grant

expiration. More than 25 percent of all

employees had grants that expired in

less than 10 years. Although there

were small overall differences between

executives and nonexecutives in the

average years before grant expiration

(9.2 years and 8.8 years, respectively)

and in their representation in the 10-

year vesting category (79.7 percent and

74.2 percent), the number of years between the granting and expiration of

options trended higher for higher-salaried employees and executives.

Which department is responsible for

recordkeeping for the stock option

plan? Human resources departments

did plan administration for nearly 62

percent of all employees. (See table

10.) Finance and accounting staff (44.4

percent) was listed as the second most

common locus for recordkeeping. The

legal department was responsible for

recordkeeping for 10.8 percent of all

employees receiving stock options

grants in 1999. (Establishments were

asked to identify all departments involved, so responses could total more

than 100 percent.)

How will the establishment account

for the cost of the 1999 grants in its

financial reports (either in the statement itself or as a footnote)? The Financial Accounting Standards Board11

requires that companies use a financial

model to determine cost estimates of

stock option grants in their accounting statements.12 The cost estimates

must be listed either directly in financial statements or as a footnote in financial reports. The above question

was asked to find out how prevalent

the Black-Scholes13 model was in determining grant costs.

The Black-Scholes model was

used by establishments with 58.4

percent of the employees getting after-hire grants in 1999. (See table 11.)

Other financial models covered 14

percent of employees.

If your establishment is publicly held,

does it expect to buy back shares on

the open market or set aside new

shares to fulfill the 1999 grants? Establishments that grant stock options

must be able to allocate shares for the

employee to exercise those grants.

Generally, companies will either repurchase shares on the open market when

employees exercise option grants or

create new shares for use in current or

future stock option grants.

Table 12 shows that stock option

grant shares for 67.7 percent of employees in publicly held establishments

will come from shares set aside for option exercise. Share buybacks or repurchases will be a source of stock

option grant shares for 32.6 percent of

employees. Data for goods-producing

industries showed that repurchased

shares would be used for 53.6 percent

of employees receiving after-hire

grants, while service-producing industries would buy back shares for about

20 percent of all such employees. Differences occurred in the buyback share

category by establishment size, with 9.3

percent of workers in establishments

with 100 employees or fewer receiving

repurchased shares, compared with

41.2 percent of those in establishments

with more than 100 employees. Multiple responses were allowed for this

question. No response was given on

the options grant source for 21.9 percent of all employees.

How many shares were awarded under grants in 1999? What was the

grant price of shares awarded in

1999? Overall, the average number of

shares granted in 1999 (per employee

who received shares) was 2,931. According to table 13, executives received

approximately 7.9 times the number of

grant shares that nonexecutives did.

Perhaps even more noteworthy is the

large difference between grants for executives and those for the less-than-

$35,000 salary group: executives received more than 49 times as many

grant shares as did the less-than-

$35,000 salary group employees.
 Compensation and Working Conditions Spring 2001 7

Stock Options

The average number of shares

granted also differed widely by establishment size. Average shares granted

by establishments with more than 100

employees were 2.3 times the size of

grants from establishments with 100 or

fewer employees. On a regional basis,

the West showed the highest level of

average stock grants (5,636 shares).

For executives, the average allocation value14 of grants was close to 8.5

times the value of nonexecutive stock

option grants in 1999. The average allocation value was obtained by multiplying the average weighted number

of shares in the category by the

weighted average grant share price. In

terms of average allocation value, executive grants were valued at approximately 80 times those for employees in

the less-than-$35,000 category.

Of course, the actual value of the

grants is unknown until shares are exercised and sold. The price of shares

may increase more or less than the value

assumed in the calculation. Grants may

expire before some or any shares are

exercised, particularly if the market price

falls below the grant price. Employees

may leave their companies before their

grants are vested. The average allocation value calculated here simply gives

a means of comparison at the time of

the grant.

One of the study goals was to

gather data on the breadth and depth

of stock option grants within the organization. This analysis addresses those

issues. These results, in addition to

incidence levels, will be used during

cost research to provide insight into

the potential impact of adding stock

options to NCS.

Where does NCS go from here?

While the initial BLS stock option research dealt with the incidence and provisions of those plans in the private

sector economy, the next part of the

research will focus on stock options as

a compensation cost to employers.

Changes in compensation costs are

measured by the quarterly Employment

Cost Index (ECI), a principal Federal

economic indicator for which data are

collected from the NCS sample. The

Employer Costs for Employee Compensation series reweights the ECI cost

data to publish levels of compensation

costs annually.

Costing stock options poses some

fundamental challenges within the NCS

framework. NCS collects cost data for

benefits ranging from paid holidays to

health insurance to workers’ compensation. The goal during data collection is to obtain the average cost per

employee by occupation for each benefit plan.15

It is usually easy to ascertain what

data need to be collected for most benefits; for example, employee health insurance is provided either by a thirdparty insurer or by the self-insuring

employer. In the case of a third party,

NCS attempts to obtain the most recent premium paid by the employer for

each worker in the occupation being

sampled. When multiple plans are offered, NCS tries to determine the plan

chosen by each employee, and its associated cost.16 If the premium rate for

each employee is not available, the total annual expenditure by the employer

for the insurance is collected. For selfinsured establishments, the total payments for the most recent annual period are obtained.

The procedures that are clear for

health insurance are not so obvious for

stock options. There is no premium

payment or other direct employer outlay of cash for stock options. So when

is their cost incurred? Is it at the time

the option is granted, at the time vesting occurs, at the time an employee exercises his or her options, at the time

the grant expires, or at some other

point? Once the appropriate time is

identified, some costs need to be measured. With no actual cash outlay to

measure, is it appropriate to use accounting reports compiled for financial

or tax purposes to develop a stock options cost for employee compensation?

Assuming BLS is able to resolve

these, and other, conceptual issues, the

practicalities of data collection will then

have to be addressed. Is it possible to

obtain a cost by occupation? Data

that relate to multiple occupations in

the establishment might not accurately

represent the cost for specific occupations, given what the test study revealed about the sizes of grants by salary. What data can and will establishments provide so that BLS can develop

a cost for employee compensation?

BLS hopes to obtain answers to all

of these questions in the next part of

its stock options testing, which will

consist of research to determine how

and if NCS can collect cost data for

stock options. BLS will consult with

outside experts for help in resolving

the theoretical and practical issues involved in determining the employer

cost of stock options. BLS will also be

conducting data collection tests aimed

at answering some of the practical questions about the availability of data from

establishments. These will probably

be a series of tests involving only a

few establishments at a time. The results from one test will be used to refine the questions and approach taken

in the following tests. BLS will have

the chance to make adjustments

throughout the testing, so that the

most effective collection procedures

result.

NCS will continue to collect stock

option incidence information as an

emerging benefit in the 2001 collection.

Concurrently, NCS will continue research and testing on stock option costing methods. Should BLS decide that

NCS will attempt to collect stock option cost information regularly, the next

step will be to determine the most appropriate method and timing for inclusion of the data in the NCS series.
8 Compensation and Working Conditions Spring 2001

1

 A feasibility study was conducted in 1999.

Its purpose was to test the use of a mail questionnaire to obtain the needed data on stock

options. The test was limited to 100 companies previously identified as having stock

options. Information collected in the test

was used to make revisions to the questionnaire for the incidence and provisions test

described in this article. See Beth Levin

Crimmel and Jeffrey L. Schildkraut, “National Compensation Survey Collects Test

Data on Stock Option Plans,” Compensation and Working Conditions, winter 1999,

pp. 17-20. 2

 The database from which the sample

was selected, the Longitudinal Database, does

not indicate whether an establishment is for

profit or not. This information was obtained

during data collection, however. 3

 After-hire grants are stock options

granted during an employee’s normal tenure

on the job. These are options that are given

after the initial hiring (or signing) phase of

employment. 4

 For survey purposes, a plan is defined as

having the same basic characteristics, such as

grant type, vesting schedule, and expiration

time. 5

 Under the Internal Revenue Code, a

nonqualified (or nonstatutory) stock option

(NSO) is taxable as wages (and deductible by

the employer) when exercised by the employee. The employee generally does not

recognize taxable income at the time that

the stock option is granted. NSOs can be

issued with an exercise price below the fair

market value of the stock. When the NSO is

exercised, the spread (difference between fair

market value and exercise price) is taxed.

After the NSO is exercised, any future appreciation will be taxed as a capital gain when

the stock is sold. 6

 Under the Internal Revenue Code, an

incentive (or statutory) stock option (ISO)

is not taxable to the employee or deductible

by the employer either when granted or exercised. The employee is taxed when the

stock acquired under the option is sold, exchanged, or transferred by bequest or inheritance. An ISO cannot be issued with an exercise price below the fair market value of the

stock; but after the stock appreciates, the

option can be exercised without being subject

to tax on the spread (difference between fair

market value and exercise price). When the

stock is sold, if the sales price is higher than

the exercise price, this profit is taxed as a

capital gain. 7

 Survey respondents were asked to select

one of the following primary grant factor

criteria: Equal size grants for all, different

size grants based on individual performance,

different size grants based on salary/pay grade,

different size grants based on occupational

type, or other. 8

 Vesting here refers to the amount of

time employees must work, after the grant,

to be able to exercise their options. Until an

employee becomes vested in part or all of his

options, he or she cannot purchase any shares

awarded under the grant. 9

 Some stock option grants place restrictions, known as claw-backs, on employees

even after they are vested. According to

George B. Paulin, President, Frederick W.

Cook & Co., “(t)he way a claw-back provision works is that when employees are granted

options, they agree to reimburse the company for any profits from exercises within a

specific period of leaving to go to work for a

competitor. The typical claw-back is 6 to 18

months, although there are many variations.”

See George W. Paulin, “Using Stock to Retain Key Employees,” World at Work Journal, third quarter 2000, p. 50.

10 When options are granted, an employee

is given a limited number of years to purchase shares awarded under the grant. The

options are said to “expire” if the employee

does not purchase the shares by the deadline.

11 The Financial Accounting Standards

Board is a nongovernment agency that establishes generally accepted U.S. accounting

principles for reporting financial information. 12 At the time of a stock option grant, an

estimate of the fair value of the grant can be

made using a financial model such as BlackScholes. 13 The Black-Scholes Model is an option

pricing model used to calculate the value of

an option by considering the stock price,

grant price and expiration date, risk-free return, and standard deviation of the stock’s

return. 14 Average allocation value is equal to the

weighted average number of shares at grant

time multiplied by the weighted average grant

price per share. According to the National

Center for Employee Ownership, the allocation amount “produces a dollar value that

can be compared across companies.” See R.

Weeden, E. Carberry, and S. Rodrick, Current

Practices in Stock Option Plan Design (Oakland, CA, National Center for Employee

Ownership, 1999), p. 24. For example, for

an employee with an average allocation value

of $10,000, a 10-percent increase above the

stock option grant price, upon exercise, would

result in double the option value when compared with a $5,000 allocation value. Please

note that average allocation value represents

a method of making only a quick comparison between stock option grants, because the

actual value of grants is unknown until shares

are exercised or expired. 15 All data from the regular NCS sample—

wage and benefit costs, incidence, and provisions—are collected for selected occupations

(based on probability proportionate to size)

within each establishment. 16 In the case of health insurance, the plan

could be a health maintenance organization

program, a fee-for-service program, or some

other type of plan. Workers also may have

coverage for themselves only or some type

of family coverage.
 Compensation and Working Conditions Spring 2001 9

Stock Options

1 Total includes after-hire grants plus

signing-bonus stock options, which are

not shown separately. 2 After-hire grants are stock options

granted during an employee's normal

tenure on the job. These are options

that are given after the initial hiring (or

signing) phase of employment. 3 Goods producing includes industries not shown separately. 4 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New

Jersey, New York, Pennsylvania, Rhode

Island, and Vermont; South—Alabama,

Delaware, District of Columbia, Florida,

Georgia, Kentucky, Louisiana, Maryland,

Mississippi, North Carolina, Oklahoma,

South Carolina, Tennessee, Texas, Virginia, and West Virginia; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan,

Minnesota, Missouri, Nebraska, North

Dakota, Ohio, South Dakota, and Wisconsin; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon,

Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data

were reported or that data did not meet

publication criteria.

Table 1. Percent of all private industry establishment employees

with a stock option grant, by salary group, industry division,

establishment size, and region, 1999

Characteristic Total1 After-hire

grants2

All employees .................................................................... 1.7 1.6

Salary group

Executives ......................................................................... 4.6 4.5

All employees, excluding executives ................................ 1.6 1.5

Less than $35,000 ......................................................... .7 –

$35,000 to $49,999 ....................................................... 1.5 1.5

$50,000 to $74,999 ....................................................... 4.2 4.0

$75,000 and above ........................................................ 12.9 12.5

Industry division

Goods producing3 ............................................................. 2.5 2.3

Manufacturing ................................................................ 3.2 3.0

Durables .................................................................... 5.3 4.9

Nondurables .............................................................. .2 –

Service producing ............................................................. 1.4 1.4

Transportation and public utilities .................................. 2.6 –

Wholesale and retail trade ............................................. 1.1 –

Finance, insurance, and real estate .............................. 5.1 –

Services ......................................................................... .7 .7

Establishment size

100 employees or fewer .................................................... .9 –

More than 100 employees ............................................ 2.5 2.4

Region4

Northeast .......................................................................... 1.1 1.1

South ................................................................................. 1.5 1.4

Midwest ............................................................................. 2.0 –

West .................................................................................. 2.1 2.0

Table 1. Percent of employees in all private industry establishments

with a stock option grant, by salary group, industry division,

establishment size, and region, 1999
10 Compensation and Working Conditions Spring 2001

1 A publicly held company is one

whose stock is traded on an exchange

and that meets certain requirements

under the law to report its financial position to the Securities and Exchange Commission (SEC). 2 Goods producing includes industries not shown separately. 3 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New

Jersey, New York, Pennsylvania, Rhode

Island, and Vermont; South—Alabama,

Delaware, District of Columbia, Florida,

Georgia, Kentucky, Louisiana, Maryland,

Mississippi, North Carolina, Oklahoma,

South Carolina, Tennessee, Texas, Virginia, and West Virginia; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan,

Minnesota, Missouri, Nebraska, North

Dakota, Ohio, South Dakota, and Wisconsin; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon,

Utah, Washington, and Wyoming.

Table 2. Percent of private industry and publicly held1

establishment employees receiving stock option grants, by salary

group, industry division, establishment size, and region, 1999

Characteristic Total Publicly

held

All employees .................................................................... 1.7 5.3

Salary group

Executives ......................................................................... 4.6 19.6

All employees, excluding executives ................................ 1.6 5.0

Less than $35,000 ......................................................... .7 2.2

$35,000 to $49,999 ....................................................... 1.5 4.9

$50,000 to $74,999 ....................................................... 4.2 10.2

$75,000 and above ........................................................ 12.9 26.8

Industry division

Goods producing2 ............................................................. 2.5 7.6

Manufacturing ................................................................ 3.2 7.6

Durables .................................................................... 5.3 14.0

Nondurables .............................................................. .2 .3

Service producing ............................................................. 1.4 4.4

Transportation and public utilities .................................. 2.6 6.4

Wholesale and retail trade ............................................. 1.1 2.3

Finance, insurance, and real estate .............................. 5.1 13.9

Services ......................................................................... .7 3.1

Establishment size

100 employees or fewer .................................................... .9 3.7

More than 100 employees ............................................ 2.5 6.2

Region3

Northeast .......................................................................... 1.1 3.8

South ................................................................................. 1.5 5.8

Midwest ............................................................................. 2.0 4.8

West .................................................................................. 2.1 6.6

Table 2. Percent of employees in all private industry and publicly held1

establishments receiving stock option grants, by salary group,

industry division, establishment size, and region, 1999
 Compensation and Working Conditions Spring 2001 11

Stock Options

1 A publicly held establishment is a

company whose stock is traded on an

exchange and that meets certain requirements under the law to report its

financial position to the Securities and

Exchange Commission (SEC). 2 To qualify as providing a stock

option, an establishment had to grant

an option to at least one employee, who

was not an owner, in 1999. 3 Goods producing includes industries not shown separately. 4 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New

Jersey, New York, Pennsylvania, Rhode

Island, and Vermont; South—Alabama,

Delaware, District of Columbia, Florida,

Georgia, Kentucky, Louisiana, Maryland,

Mississippi, North Carolina, Oklahoma,

South Carolina, Tennessee, Texas, Virginia, and West Virginia; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan,

Minnesota, Missouri, Nebraska, North

Dakota, Ohio, South Dakota, and Wisconsin; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon,

Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data

were reported or that data did not meet

publication criteria.

Table 3. Percent of private industry and publicly held1

establishments offering stock options,2 by industry division,

establishment size, and region, 1999

Characteristic Total Publicly

held

Total .................................................................................. 2.4 22.1

Industry division

Goods producing3 ............................................................. 1.7 29.0

Manufacturing ................................................................ 3.2 23.2

Durables .................................................................... 4.4 30.9

Nondurables .............................................................. 1.5 11.3

Service producing ............................................................. 2.6 21.3

Transportation and public utilities .................................. 3.6 17.0

Wholesale and retail trade ............................................. 4.8 26.6

Finance, insurance, and real estate .............................. 3.1 33.9

Services ......................................................................... .4 5.5

Establishment size

100 employees or fewer .................................................... 2.1 21.0

More than 100 employees ............................................ 10.1 30.5

Region4

Northeast .......................................................................... – –

South ................................................................................. 1.6 16.3

Midwest ............................................................................. 1.7 15.7

West .................................................................................. 1.9 16.2
12 Compensation and Working Conditions Spring 2001

Table 4. Percent of private industry establishments offering selected equity compensation plans, by industry division, establishment size,

and region, 1999

Characteristic Stock

options 1

Stock

purchase

plans2

Restricted

stock 3

Employee

stock

ownership

plans4

Stock bonus

plans5

Phantom or

shadow

stock 6

Stock

appreciation

rights 7

Total .................................................................................. 2.4 4.5 .2 1.1 .6 .2 .1

Industry division

Goods producing8 ............................................................. 1.7 1.4 .2 .4 .2 9 ( ) .1

Manufacturing ................................................................ 3.2 4.0 .4 1.0 .4 .1 .2

Durables .................................................................... 4.4 3.2 .5 .9 .5 .2 .2

Nondurables .............................................................. 1.5 5.1 –––––

Service producing ............................................................. 2.6 5.1 .2 1.2 .7 .2 .1

Transportation and public utilities .................................. 3.6 7.8 1.6 3.2 2.3 – 1.0

Wholesale and retail trade ............................................. 4.8 6.7 – 2.1 1.4 – –

Finance, insurance, and real estate .............................. 3.1 2.3 – .9 – – –

Services ......................................................................... .4 – 9 ( ) .3 .2 – –

Establishment size

100 employees or fewer .................................................... 2.1 4.1 .1 .9 .6 – .1

More than 100 employees ............................................ 10.1 13.9 2.2 6.1 2.3 .8 1.0

Region10

Northeast .......................................................................... – 7.7 .2 .7 – – –

South ................................................................................. 1.6 – .1 .6 .5 – .1

Midwest ............................................................................. 1.7 1.6 .6 .8 .4 9 ( ) .1

West .................................................................................. 1.9 2.9 .1 2.6 1.3 – –

1 To qualify as providing a stock option, an establishment had to grant an

option to at least one employee, who was not an owner, in 1999. For the other

forms of equity compensation in this table, the establishment was asked if the

program was offered to its employees, without regard to period or to type of

employee. 2

 Stock purchase plans are programs under which employees buy shares

in the company’s stock. A qualified plan is a program that meets the IRS

statutory requirements and results in a more favorable benefits and tax

treatment for the employee and company. Stock may be offered at a fixed price

(usually below market) and paid for in full by employees. A nonqualified plan

does not qualify for favorable tax treatment and may include any terms. 3 A restricted stock plan is one in which stock is given (or sold at a

discount) to an employee, who is restricted from selling or transferring it for a

specified period (usually 3 to 5 years). The employee receives dividends, but

must forfeit the stock if he or she terminates employment before the restriction

period ends. If the employee remains in the employ of the company through the

restricted period, the shares vest, irrespective of employee or company

performance. 4 An employee stock ownership plan is a defined contribution plan in which

the employer contributes to a fund that invests primarily in company stock and

makes distributions in stock or cash. 5 A stock bonus plan is a defined contribution plan financed solely by the

employer, or jointly by the employer and employee. Contributions are placed in

a separate trust fund that invests in securities, including those of the employing company. When eligible employees retire or separate from the company,

proceeds from the trust fund are paid out to them in the form of company stock

or cash. 6 Phantom stock plans give an employee many of the benefits of stock

ownership without actually giving them any company stock. Instead of giving

an employee stock or stock options, the company adopts a phantom stock

plan and credits the employee with a number of "units" of phantom stock. Each

“unit” increases in value as the company’s shares of common stock increase

and as dividends are declared on the stock. 07 Stock appreciation rights are contractual rights granted to an individual

by which the recipient has the right to receive an amount equal to the appreciation on a specified number of shares of stock over a specified period.

Generally, the recipient controls the timing of exercise of the right, which may

be payable in cash or stock of the corporation. 08 Goods producing includes industries not shown separately.

09 Less than 0.05 percent.

10 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode

Island, and Vermont; South—Alabama, Delaware, District of Columbia, Florida,

Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin; and West—Alaska,

Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico,

Oregon, Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data were reported or that data did not meet

publication criteria.

Stock Options
 Compensation and Working Conditions Spring 2001 13

Stock Options

1 After-hire grants are stock options

granted during an employee’s normal tenure

on the job. These are options that are given

after the initial hiring (or signing) phase of

employment. 2 Under the Internal Revenue Code, an

incentive (or statutory) stock option (ISO)

is not taxable to the employee or deductible

by the employer either when granted or exercised. The employee is taxed when the

stock acquired under the option is sold,

exchanged, or transferred by bequest or

inheritance. An ISO cannot be issued with

an exercise price below the fair market value

of the stock but, after the stock appreciates, the option can be exercised without

being subject to tax on the spread (difference between fair market value and exercise price). If the sales price is higher than

the exercise price, this profit is taxed as a

capital gain. 3 Under the Internal Revenue Code, a

nonqualified (or nonstatutory) stock option

(NSO) is taxable as wages (and deductible

by the employer) when exercised by the

employee. The employee generally does not

recognize taxable income at the time that

the stock option is granted. NSOs can be

issued with an exercise price below the fair

market value of the stock. When the NSO is

exercised, the spread (difference between

fair market value and exercise price) is taxed.

After the NSO is exercised, any future appreciation will be taxed as a capital gain

when the stock is sold. 4 Goods producing includes industries

not shown separately. 5 The regional coverage is as follows:

Northeast— Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New

York, Pennsylvania, Rhode Island, and Vermont; Midwest— Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota,

and Wisconsin; South—Alabama, Delaware,

District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi,

North Carolina, Oklahoma, South Carolina,

Tennessee, Texas, Virginia, and West Virginia; andWest—Alaska, Arizona, California,

Colorado, Hawaii, Idaho, Montana, Nevada,

New Mexico, Oregon, Utah, Washington, and

Wyoming.

NOTE: Dash indicates that no data were

reported or that data did not meet publication criteria. Sums of individual items may

exceed 100 percent because multiple responses could be given.

Table 5. Percent of employees receiving after-hire grants1 in 1999, by type

of grant

Characteristic Incentive stock

options2

Nonqualified

stock options3

All employees .................................................................... 31.2 78.0

Salary group

Executives ......................................................................... 54.8 69.2

All employees, excluding executives ................................ 29.4 78.6

Less than $35,000 ......................................................... – 80.1

$35,000 to $49,999 ....................................................... 26.8 79.3

$50,000 to $74,999 ....................................................... 30.2 80.6

$75,000 and above ........................................................ 37.5 75.2

Industry division

Goods producing4 ............................................................. 32.5 78.6

Manufacturing ................................................................ 28.8 79.2

Durables .................................................................... 28.7 79.2

Nondurables .............................................................. 35.2 83.3

Service producing ............................................................. 30.6 77.6

Transportation and public utilities .................................. 15.1 98.4

Wholesale and retail trade ............................................. 63.2 41.4

Finance, insurance, and real estate .............................. 13.1 90.3

Services ......................................................................... 26.9 89.3

Establishment size

100 employees or fewer .................................................... 46.9 63.4

More than 100 employees ............................................ 24.1 84.6

Region5

Northeast .......................................................................... 24.6 83.9

Midwest ............................................................................. – 76.2

South ................................................................................. 30.0 70.1

West .................................................................................. 44.0 84.8
14 Compensation and Working Conditions Spring 2001

1 After-hire grants are stock options

granted during an employee’s normal tenure

on the job. These are options that are given

after the initial hiring (or signing) phase of

employment. 2 For survey purposes, a plan is defined

as having the same basic characteristics such

as grant type, vesting schedule, and expiration time. 3 Goods producing includes industries not

shown separately. 4

 The regional coverage is as follows: Northeast—Connecticut, Maine, Massachusetts,

New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North

Dakota, Ohio, South Dakota, and Wisconsin;

South—Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana,

Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia; and West—Alaska,

Arizona, California, Colorado, Hawaii, Idaho,

Montana, Nevada, New Mexico, Oregon, Utah,

Washington, and Wyoming.

NOTE: Dash indicates that no data were

reported or that data did not meet publication

criteria. Sums of individual items may not equal

100 percent due to nonresponse or confidentiality concerns that prohibit the publication of

some data.

Table 6. Percent of employees receiving after-hire grants1 in 1999, one-time

grant or ongoing plan2

Characteristic One-time grant Ongoing plan

All employees .................................................................... 12.6 87.1

Salary group

Executives ......................................................................... 11.6 85.5

All employees, excluding executives ................................ 12.6 87.2

Less than $35,000 ......................................................... 13.5 86.5

$35,000 to $49,999 ....................................................... 12.0 88.0

$50,000 to $74,999 ....................................................... 12.5 87.2

$75,000 and above ........................................................ 12.2 87.4

Industry division

Goods producing3 ............................................................. 3.8 96.2

Manufacturing ................................................................ – 97.9

Durables .................................................................... – 98.1

Nondurables .............................................................. – 87.4

Service producing ............................................................. 17.2 82.2

Transportation and public utilities .................................. – 67.4

Wholesale and retail trade ............................................. 27.8 71.3

Finance, insurance, and real estate .............................. – 100.0

Services ......................................................................... – 79.0

Establishment size

100 employees or fewer .................................................... 12.0 87.5

More than 100 employees ............................................ 12.8 86.9

Region4

Northeast .......................................................................... 43.9 53.6

Midwest ............................................................................. – 89.9

South ................................................................................. 3.4 96.6

West .................................................................................. 7.5 92.5

Table 6. Percent of employees receiving after-hire grants1 in 1999, by one-time

grant or ongoing plan2
 Compensation and Working Conditions Spring 2001 15

Stock Options

1 After-hire grants are stock options granted during an

employee’s normal tenure on the job. These are options that are

given after the initial hiring (or signing) phase of employment. 2

 Includes a combination of criteria or other factors such as

company performance. 3 Goods producing includes industries not shown separately. 4

 The regional coverage is as follows: Northeast—Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New

York, Pennsylvania, Rhode Island, and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri,

Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin;

South—Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina,

Oklahoma, South Carolina, Tennessee, Texas, Virginia, and

West Virginia; and West—Alaska, Arizona, California, Colorado,

Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah,

Washington, and Wyoming.

NOTE: Dash indicates that no data were reported or that

data did not meet publication criteria. Sums of individual items

may not equal 100 percent due to rounding, to nonresponse, or

to confidentiality concerns that prohibit the publication of some

data.

Table 7. Percent of employees receiving after-hire grants1 in 1999, by criteria for grant

Characteristic Individual

performance

Salary or pay

grade

Occupational

type Other2

All employees .................................................................... 14.4 52.4 7.9 25.3

Salary group

Executives ......................................................................... 49.8 22.7 12.2 15.3

All employees, excluding executives ................................ 11.7 54.6 7.5 26.1

Less than $35,000 ......................................................... – 74.5 1.3 9.3

$35,000 to $49,999 ....................................................... 4.9 61.9 9.3 24.0

$50,000 to $74,999 ....................................................... 9.1 45.0 8.1 37.8

$75,000 and above ........................................................ 14.7 36.3 12.5 36.5

Industry division

Goods producing3 ............................................................. 9.2 35.4 5.8 49.5

Manufacturing ................................................................ – 37.4 4.3 52.3

Durables .................................................................... – 37.7 3.9 52.9

Nondurables .............................................................. 25.4 23.7 – –

Service producing ............................................................. 17.2 61.4 8.9 12.5

Transportation and public utilities .................................. 8.2 85.0 – .3

Wholesale and retail trade ............................................. – 32.6 15.3 –

Finance, insurance, and real estate .............................. 5.4 89.4 – 3.2

Services ......................................................................... – 39.5 13.1 40.0

Establishment size

100 employees or fewer .................................................... – 48.9 10.2 13.4

More than 100 employees ............................................ 8.6 53.9 6.8 30.7

Region4

Northeast .......................................................................... 16.9 62.2 – 3.4

Midwest ............................................................................. – 21.3 2.5 55.8

South ................................................................................. 7.9 76.9 8.3 –

West .................................................................................. 12.3 61.1 8.8 17.8
16 Compensation and Working Conditions Spring 2001

1 After-hire grants are stock options granted during an employee’s

normal tenure on the job. These are options that are given after the initial

hiring (or signing) phase of employment. 2 Vesting here refers to the amount of time employees must work, after

the grant, before being able to exercise their options. Until an employee

becomes vested in part or all of his options, he or she cannot purchase any

shares awarded under the grant. 3 Goods producing includes industries not shown separately.

4 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania,

Rhode Island, and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota,

and Wisconsin; South—Alabama, Delaware, District of Columbia, Florida,

Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia; and

West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data were reported or that data did not

meet publication criteria. Sums of individual characteristics may not equal

100 percent due to rounding or to confidentiality concerns that prohibit the

publication of some data.

Table 8. After-hire stock option grants1 in 1999: Average number of years and percent distribution of employees by years needed for

full vesting2

Characteristic

Average years

needed for full

vesting

Less than 2

years 2 years 3 years 4 years More than 4years

All employees .................................................................... 3.0 11.4 16.1 42.3 15.5 14.7

Salary group

Executives ......................................................................... 2.4 39.6 1.0 33.7 12.7 13.1

All employees, excluding executives ................................ 3.0 9.2 17.2 43.0 15.7 14.8

Less than $35,000 ......................................................... 2.8 – 2.4 58.0 10.7 –

$35,000 to $49,999 ....................................................... 3.2 7.7 9.5 55.6 14.3 13.0

$50,000 to $74,999 ....................................................... 3.0 – 31.1 36.9 14.9 13.6

$75,000 and above ........................................................ 3.2 6.4 27.4 23.6 22.6 20.0

Industry division

Goods producing3 ............................................................. 3.0 – 44.6 19.1 – 18.0

Manufacturing ................................................................ 3.0 – 47.1 18.3 – 19.1

Durables .................................................................... 3.0 – 48.2 18.2 – 18.8

Nondurables .............................................................. 4.3 – – 20.3 47.7 –

Service producing ............................................................. 3.0 15.0 .9 54.7 16.5 12.9

Transportation and public utilities .................................. 3.0 – – 83.6 .3 –

Wholesale and retail trade ............................................. 2.0 – 2.8 19.8 25.1 5.9

Finance, insurance, and real estate .............................. 3.5 – – 74.9 – 23.8

Services ......................................................................... 3.6 – – 48.2 41.0 9.2

Establishment size

100 employees or fewer .................................................... 2.6 – 1.6 41.1 16.7 –

More than 100 employees ............................................ 3.2 3.5 22.6 42.9 15.0 16.1

Region4

Northeast .......................................................................... 3.2 6.8 – 67.2 – 7.5

Midwest ............................................................................. 2.1 – 46.9 30.6 2.0 2.1

South ................................................................................. 3.8 – 1.1 43.9 – 35.5

West .................................................................................. 3.3 10.9 – 41.6 33.7 13.5
 Compensation and Working Conditions Spring 2001 17

Stock Options

1

 After-hire grants are stock options granted during

an employee’s normal tenure on the job. These are

options that are given after the initial hiring (or signing)

phase of employment. 2 When options are granted, an employee is given

a limited number of years to purchase shares awarded

under the grant. The options are said to “expire” if the

employee does not purchase the shares by the deadline.3 Goods producing includes industries not shown

separately. 4

 The regional coverage is as follows: Northeast—

Connecticut, Maine, Massachusetts, New Hampshire,

New Jersey, New York, Pennsylvania, Rhode Island,

and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas,

Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin; South—

Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North

Carolina, Oklahoma, South Carolina, Tennessee, Texas,

Virginia, and West Virginia; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana,

Nevada, New Mexico, Oregon, Utah, Washington, and

Wyoming.

NOTE: Dash indicates that no data were reported

or that data did not meet publication criteria. Sums of

individual characteristics may not equal 100 percent

due to rounding or to confidentiality concerns that

prohibit the publication of some data.

Table 9. After-hire stock option grants1 in 1999: Average number of years and percent

distribution of employees by years before grant expires2

Characteristic

Average years

before grant

expiration

Less than 10

years 10 years

All employees .................................................................... 8.9 25.4 74.6

Salary group

Executives ......................................................................... 9.2 20.2 79.7

All employees, excluding executives ................................ 8.8 25.8 74.2

Less than $35,000 ......................................................... 8.1 40.6 59.4

$35,000 to $49,999 ....................................................... 8.5 36.3 63.7

$50,000 to $74,999 ....................................................... 9.2 17.3 82.7

$75,000 and above ........................................................ 9.6 8.9 91.1

Industry division

Goods producing3 ............................................................. 9.6 – 87.6

Manufacturing ................................................................ 9.6 – 86.9

Durables .................................................................... 9.6 – 86.7

Nondurables .............................................................. 9.9 – 97.4

Service producing ............................................................. 8.5 32.5 67.5

Transportation and public utilities .................................. 9.8 – 94.4

Wholesale and retail trade ............................................. 9.6 7.6 92.4

Finance, insurance, and real estate .............................. 6.4 71.9 28.1

Services ......................................................................... 9.4 – 80.1

Establishment size

100 employees or fewer .................................................... 8.2 35.8 64.2

More than 100 employees ............................................ 9.1 21.0 79.0

Region4

Northeast .......................................................................... 8.9 – 66.9

Midwest ............................................................................. 9.5 – 86.5

South ................................................................................. 8.2 36.7 63.3

West .................................................................................. 8.7 – 74.7
18 Compensation and Working Conditions Spring 2001

1 After-hire grants are stock options granted during an employee’s

normal tenure on the job. These are options that are given after the initial

hiring (or signing) phase of employment. 2 Goods producing includes industries not shown separately.

3

 The regional coverage is as follows: Northeast—Connecticut, Maine,

Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania,

Rhode Island, and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas,

Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South

Dakota, and Wisconsin; South—Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North

Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and

West Virginia; and West—Alaska, Arizona, California, Colorado, Hawaii,

Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and

Wyoming.

NOTE: Dash indicates that no data were reported or that data did not

meet publication criteria. Sums of individual items may exceed 100

percent because multiple responses could be given.

Table 10. Percent of employees receiving after-hire grants1 in 1999, by department responsible for record keeping

Characteristic Human

resources

Finance or

accounting Legal Other department No response

All employees .................................................................... 61.8 44.4 10.8 6.4 10.3

Industry division

Goods producing2 ............................................................. 65.1 66.0 – 9.1 2.3

Manufacturing ................................................................ 63.6 65.9 – 9.6 2.4

Durables .................................................................... 64.1 66.2 – 9.6 2.4

Nondurables .............................................................. – 55.9 – – –

Service producing ............................................................. 60.1 32.9 9.2 5.0 14.6

Transportation and public utilities .................................. – – .2 – –

Wholesale and retail trade ............................................. 32.5 65.4 – 7.0 –

Finance, insurance, and real estate .............................. 94.6 12.2 – – –

Services ......................................................................... 43.6 44.9 – – –

Establishment size

100 employees or fewer .................................................... 56.9 41.2 – 1.5 1.8

More than 100 employees ............................................ 64.0 45.9 13.6 8.6 14.2

Region3

Northeast .......................................................................... 48.6 32.8 3.9 6.8 –

Midwest ............................................................................. 67.5 72.1 2.3 4.9 –

South ................................................................................. 73.3 37.5 16.8 – 2.2

West .................................................................................. 50.4 23.1 – – 13.9
 Compensation and Working Conditions Spring 2001 19

Stock Options

1

 After-hire grants are stock options granted during

an employee’s normal tenure on the job. These are

options that are given after the initial hiring (or signing)

phase of employment. 2 The Black-Scholes model is an option pricing

model used to calculate the value of an option by

considering the stock price, grant price and expiration

date, risk-free return, and the standard deviation of the

stock’s return. 3 Goods producing includes industries not shown

separately. 4

 Service producing includes industries not shown

separately. 5 The regional coverage is as follows: Northeast—

Connecticut, Maine, Massachusetts, New Hampshire,

New Jersey, New York, Pennsylvania, Rhode Island,

and Vermont; Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North

Dakota, Ohio, South Dakota, and Wisconsin; South—

Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North

Carolina, Oklahoma, South Carolina, Tennessee, Texas,

Virginia, and West Virginia; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana,

Nevada, New Mexico, Oregon, Utah, Washington, and

Wyoming.

NOTE: Dash indicates that no data were reported

or that data did not meet publication criteria. Sums of

individual items may not equal 100 percent due to

nonresponse or to confidentiality concerns that prohibit the publication of some data.

Table 11. Percent of employees receiving after-hire grants1 in 1999, by financial reporting

used

Characteristic BlackScholes model2

Other financial

model No model

All employees .................................................................... 58.4 14.0 14.4

Industry division

Goods producing3 ............................................................. 77.1 – –

Manufacturing ................................................................ 79.8 – –

Durables .................................................................... 79.6 – –

Nondurables .............................................................. 91.4 – –

Service producing4 ............................................................ 48.4 14.0 20.1

Wholesale and retail trade ............................................. 32.9 – –

Finance, insurance, and real estate .............................. 67.2 29.9 –

Services ......................................................................... 32.1 – –

Establishment size

100 employees or fewer .................................................... 40.7 27.7 –

More than 100 employees ............................................ 66.4 – 10.6

Region5

Northeast .......................................................................... 22.4 – –

Midwest ............................................................................. 62.8 – –

South ................................................................................. 64.1 28.3 5.4

West .................................................................................. 66.9 – 9.4

Table 11. Percent of employees receiving after-hire grants1 in 1999, by financial reporting

model used
20 Compensation and Working Conditions Spring 2001

1 After-hire grants are stock options granted during an

employee’s normal tenure on the job. These are options that

are given after the initial hiring (or signing) phase of employment.2 A publicly held company is one whose stock is traded on

an exchange and that meets certain requirements under the

law to report its financial position to the Securities and Exchange Commission (SEC). 3 Goods producing includes industries not shown separately. 4 Service producing includes industries not shown separately. 5 The regional coverage is as follows: Northeast—Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont;

Midwest—Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota,

and Wisconsin; South—Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee,

Texas, Virginia, and West Virginia; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada,

New Mexico, Oregon, Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data were reported or that

data did not meet publication criteria. Sums of individual items

may exceed 100 percent because multiple responses could be

given.

Table 12. Percent of employees receiving after-hire grants1 in 1999, by source of shares, publicly held2

establishments only

Characteristic Buy back

shares

Set aside new

shares Other No response

All employees .................................................................... 32.6 67.7 – 21.9

Industry division

Goods producing3 ............................................................. 53.6 79.0 3.9 –

Manufacturing ................................................................ 52.9 79.4 4.1 –

Durables .................................................................... 53.9 79.8 4.2 –

Nondurables .............................................................. – 63.3 – –

Service producing4 ............................................................ 20.2 61.1 – 25.1

Wholesale and retail trade ............................................. 25.8 54.4 – 30.2

Finance, insurance, and real estate .............................. 9.2 91.4 – –

Services ......................................................................... – – – 49.6

Establishment size

100 employees or fewer .................................................... 9.3 69.7 – 11.2

More than 100 employees ............................................ 41.2 67.0 2.0 25.9

Region5

Northeast .......................................................................... 25.4 46.3 – 37.0

Midwest ............................................................................. 62.7 69.7 4.1 22.5

South ................................................................................. 12.6 91.7 – 5.6

West .................................................................................. 25.0 54.1 – 29.1

Table 12. Percent of employees receiving after-hire grants1 in 1999, by source of shares in publicly held2

establishments
 Compensation and Working Conditions Spring 2001 21

Stock Options

1 After-hire grants are stock options granted during an

employee’s normal tenure on the job. These are options that

are given after the initial hiring (or signing) phase of employment.2 Average allocation value is equal to average number of

shares at grant times average grant price per share. 3 Goods producing includes industries not shown separately. 4 The regional coverage is as follows: Northeast—Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New

York, Pennsylvania, Rhode Island, and Vermont; Midwest—

Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri,

Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin;

South— Alabama, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia,

and West Virginia; and West—Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon,

Utah, Washington, and Wyoming.

NOTE: Dash indicates that no data were reported or that

data did not meet publication criteria.

Table 13. After-hire stock option grants1 in 1999: Average number of shares at grant, average grant

price per share, and average allocation value

Characteristic Average number of

shares at grant

Average grant price

per share

Average allocation

value2 (column 1 x

column 2)

All employees .................................................................... 2,931 $33.58 $98,423

Salary group

Executives ......................................................................... 15,533 35.05 544,432

All employees, excluding executives ................................ 1,967 32.70 64,321

Less than $35,000 ......................................................... 315 21.56 6,791

$35,000 to $49,999 ....................................................... 534 19.42 10,370

$50,000 to $74,999 ....................................................... 1,693 10.28 17,404

$75,000 and above ........................................................ 4,825 40.23 194,110

Industry division

Goods producing3 ............................................................. 2,870 35.25 101,168

Manufacturing ................................................................ 2,190 21.23 46,494

Durables .................................................................... 2,152 20.72 44,589

Nondurables .............................................................. 3,839 33.76 129,605

Service producing ............................................................. 2,963 32.73 96,979

Transportation and public utilities .................................. 3,429 34.76 119,192

Wholesale and retail trade ............................................. 4,858 – –

Finance, insurance, and real estate .............................. 938 53.54 50,221

Services ......................................................................... 3,337 10.45 34,872

Establishment size

100 employees or fewer .................................................... 1,566 23.61 36,973

More than 100 employees ............................................ 3,546 35.57 126,131

Region4

Northeast .......................................................................... 2,541 44.79 113,811

Midwest ............................................................................. 720 18.77 13,514

South ................................................................................. 3,201 – –

West .................................................................................. 5,636 33.92 191,173