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Study Shows Extent of Broad-based Stock Options As FASB Announces Decision To Expense Stock Options

Fourteen million American workers or 13% of the entire private sector workforce hold stock options according to a new national survey. A large segment of the citizens holding stock options, 94%, consider themselves part of the middle class, working class, or lower class. Only 15% identify themselves as managers, while 59% have annual salaries of less than $75,000. The study was released as the Financial Accounting Standards Board recommended the most far-reaching changes in stock options in U.S. financial history by requiring the expensing of stock options.

The study sheds light on the continuing public debate about the role of stock options and employee ownership in American society, who gets them, who deserves them, and how they are reported to investors. The study was prepared by Professors Joseph Blasi and Douglas Kruse of Rutgers University's School of Management and Labor Relations and Professor Richard Freeman of Harvard University's Department of Economics. Blasi and Kruse are co-authors with Aaron Bernstein of the new book, In The Company of Owners: The Truth About Stock Options (New York: Basic Books) which explores the growth of stock options for most employees in high technology companies.

The study provides the most detailed national picture to date of the stock option phenomenon in the American economy and measures the extent to which stock options have expanded in recent years beyond top executives to become more broad-based in many industries. For example, 57% of workers in computer services hold company stock options, as do 43% of workers in communications, and 27% in the finance industry. Workers holding stock options span both manufacturing and service industries and extend beyond the high-tech sector. In durable manufacturing 23% of workers hold stock options as do 17% of workers in non-durable manufacturing. In service industries, 13% of the employees in transportation hold stock options, as do 11% in both wholesale and retail services. While only 4% of service workers hold stock options, one in ten blue collar workers now holds options. Options are held by 17% of white collar workers, 17% of professional workers, 23% of management support workers such as accounting, human resources, purchasing and other fields, and 15% of management workers. Approximately the same proportion of unionized workers hold stock options -- 15% -- as non-union workers -- 14%.

One of the most controversial issues surrounding the FASB decision is whether the expensing of stock options will lead to cutbacks in the number of non-executive employees receiving options and a reduction in broad-based employee ownership nationwide. A number of corporations have announced that they plan to cut back options for non-executive employees in reaction to expensing and several surveys indicate that many others may plan to do the same. The study also sheds light on the number of workplaces in the country that granted stock options to broad groups of workers in 2002. A random sampling of the different physical locations of companies nationwide found that 16 out of 100 workplaces connected to public stock market companies granted stock options in 2002 to more than half of their employees. Among closely-held businesses -- which make up the lion's share of mostly smaller and medium size establishments in the country -- 4 out of every 100 granted options to a majority of workers in 2002. These include pre-IPO companies. To the extent the national debate on stock options has the potential to influence the Presidential election, the study provides information on the political attitudes and behaviors of the those citizens holding stock options. Holders of stock options are evenly distributed among Democrats, Republicans and Independents and have a higher rate of voting in Presidential elections.

The study is based on the 2002 General Social Survey (GSS) and the 2003 National Organizations Survey (NOS) conducted by the National Opinion Research Center at the University of Chicago. The surveys are based on a national random sample of working adults and work establishments.

Note: A related issue in this debate is the potential impact on the widely popular Employee Stock Purchase Plans that many corporations use as an opportunity for regular workers to purchase company stock. The survey also provides up-to-date data on the holdings of company stock by different categories of employees in the U.S. These data are also available.

For a copy of the recent book by Joseph Blasi, Douglas Kruse and Aaron Bernstein, In The Company of Owners: The Truth About Stock Options, please call Jason Brantley at Basic Books in New York, 212-340-8164.