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Broad-Based Employee Stock Options in the U.S.: Company Performance and Characteristics 

by: Sesil, James; Kroumova, Maya; Kruse, Douglas; Blasi, Joseph
Source: Center for HR Strategy, Rutgers University 

While stock options have traditionally been reserved to top management employees, in recent years there has been strong growth of plans making stock options available to a broader group of employees. This paper analyses data on 490 companies with broad-based stock option plans, matched to data from Compustat in order to compare their characteristics and performance to that of other public companies. Major findings are that 1) companies with broad-based plans have higher levels of productivity, Tobin's Q, and employment and sales growth than otherwise-similar firms, 2) average compensation levels are higher among such companies both before and after the introduction of broadbased plans, indicating that stock options appear to come on top of other compensation, and 3) increases in average productivity appear to counter balance the dilution effect so that average total shareholder returns are unaffected by the introduction of broad-based stock option plans.