Summary
Stock options garnered many headlines during the recent high-tech boom and bust. While media attention focused on fortunes gained and lost, little background information was offered on the nature of various plans, or the employers and employees involved. On the one hand, plans such as stock options allow employees to share company risks and rewards, in the hope that they themselves will be financially rewarded. On the other hand, companies see this benefit as a way to encourage greater employee effort, as well as to attract and retain high-quality workers.
Equity compensation is not new. The United States has had legislation governing employee ownership plans since 1974, and other countries have had similar tax and legal requirements. Canada has no specific federal legislation on employee ownership plans; however, certain situations are covered in tax legislation and several provinces provide supporting grants or tax breaks. As a result, the terms ’employee share ownership plan’ (ESOP), ‘stock option,’ ‘stock purchase plan,’ and ‘equity compensation’ are often used interchangeably. Without a central legislative focus, evidence on the breadth and depth of employee stock ownership has been piecemeal. In 2002, The Globe and Mail reported that about one-third of the 100 largest companies in Canada have some form of long-term stock plan. But do these plans extend to all employees? Do smaller companies also have plans? And what is the range of plans offered?
This article describes several forms of stock purchase plans in Canada and examines participation using the Workplace and Employee Survey. Some U.S. statistics are presented as well.
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