Giving stock to more employees drives improved corporate performance.
Sure, stock options have been around for years — it is their growing pervasiveness that should be on the minds of HR departments.
In their report for the Conference Board of Canada, Assessing the options: Stock option plans in Canada, authors Derrick Hynes and Judy Lendvay-Zwickl conclude that just as variable compensation and annual incentive plans have become essential parts of total reward strategies, so too will stock options.
And why not? Employees want them, so stocks will become necessary as a recruitment and retention tool. But employers shouldn’t balk at the idea. On the contrary, research suggests companies that introduce stock option plans perform better than those that don’t. Hynes and Lendvay-Zwickl say companies with stock options in place grow up to 11 per cent faster than those without a plan.
Early this month, telecommunications firm TELUS announced they will be giving stock options to every employee in the company.
Though they are not the first to go this route, they are one of a small minority.
Research from the Conference Board suggests less than 10 per cent of Canadian firms have in place a broad-based plan that offers stocks to non-management employees. Even then, companies are selective about who receives options. In cases where a broad-based plan is in place, fewer than half of employees actually received the options.
As for companies like TELUS, that offer broad-based plans, other research from the United States shows these companies experienced revenue growth of more than 37 per cent, while companies that reserved options for management only, grew at just less than 25 per cent.
“It is not that common to see a plan that goes to all employees, from the part-time clerical people, right to the top of the house,” said Rob Beynon, director of compensation at the Burnaby, B.C.-based TELUS. He explained that by giving stock to all employees, they hope to create the right environment for success.
“There are two key values that we are really trying to instill. One is teamwork and the other is growth,” he said. “By offering stocks right from the top of the house down, everyone becomes an owner and it is an excellent way of developing those values as well providing employees an opportunity for wealth creation.”
There will be some challenges around administering of the program: co-ordination with the stock exchanges that list TELUS and the company will have to be cognizant that dilution doesn’t become a problem. Aside from that, they will need to be prepared to support the more than 20,000 employees receiving the options by helping them understand how they will be effected.
Right now the challenge is implementation. In two years when the options vest, the issue will be helping employees manage it. But Beynon said it will be an opportunity to renew the interest and get people excited again.
Giving employees stocks should also help hold onto employees longer, said Beynon.
“Options are a long-term investment. They are not something that earns value the next day. What we are saying to people is that this is something that is good over the long haul.”
In their report for the Conference Board of Canada, Assessing the options: Stock option plans in Canada, authors Derrick Hynes and Judy Lendvay-Zwickl conclude that just as variable compensation and annual incentive plans have become essential parts of total reward strategies, so too will stock options.
And why not? Employees want them, so stocks will become necessary as a recruitment and retention tool. But employers shouldn’t balk at the idea. On the contrary, research suggests companies that introduce stock option plans perform better than those that don’t. Hynes and Lendvay-Zwickl say companies with stock options in place grow up to 11 per cent faster than those without a plan.
Early this month, telecommunications firm TELUS announced they will be giving stock options to every employee in the company.
Though they are not the first to go this route, they are one of a small minority.
Research from the Conference Board suggests less than 10 per cent of Canadian firms have in place a broad-based plan that offers stocks to non-management employees. Even then, companies are selective about who receives options. In cases where a broad-based plan is in place, fewer than half of employees actually received the options.
As for companies like TELUS, that offer broad-based plans, other research from the United States shows these companies experienced revenue growth of more than 37 per cent, while companies that reserved options for management only, grew at just less than 25 per cent.
“It is not that common to see a plan that goes to all employees, from the part-time clerical people, right to the top of the house,” said Rob Beynon, director of compensation at the Burnaby, B.C.-based TELUS. He explained that by giving stock to all employees, they hope to create the right environment for success.
“There are two key values that we are really trying to instill. One is teamwork and the other is growth,” he said. “By offering stocks right from the top of the house down, everyone becomes an owner and it is an excellent way of developing those values as well providing employees an opportunity for wealth creation.”
There will be some challenges around administering of the program: co-ordination with the stock exchanges that list TELUS and the company will have to be cognizant that dilution doesn’t become a problem. Aside from that, they will need to be prepared to support the more than 20,000 employees receiving the options by helping them understand how they will be effected.
Right now the challenge is implementation. In two years when the options vest, the issue will be helping employees manage it. But Beynon said it will be an opportunity to renew the interest and get people excited again.
Giving employees stocks should also help hold onto employees longer, said Beynon.
“Options are a long-term investment. They are not something that earns value the next day. What we are saying to people is that this is something that is good over the long haul.”
