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May 03, 2002
Company Stock: Smaller Return, More Education
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ing the next 12 months, many U.S. employees can expect to see a decrease in the proportion of their total compensation delivered by company stock, and an increase in communication and education around stock risk and reward, according to Hewitt Associates, a global outsourcing and consulting firm.

In a recent study titled "Company Stock in Compensation Plans," Hewitt surveyed 202 major U.S. companies, and found that 34 percent of these organizations are planning to decrease the proportion of employee total compensation delivered by stock options or other forms of stock. Meanwhile, 52 percent of the companies will maintain current levels, and 14 percent expect to increase the amount of stock in their employees' total compensation packages.

Additionally, the Hewitt study revealed that the use of discounted or no-fee stock purchase plans is on the rise. In fact, although 56 percent of those surveyed will remain constant with their use of these programs, 28 percent of the companies will increase their use, and only 16 percent will experience a decrease.

"While several employers are still looking to create an ownership culture within their organizations, many employees would prefer the stability that comes with cash compensation," said Ken Abosch, a business leader for Hewitt Associates.

"As a result, we're seeing companies increase their use of discounted and no-fee stock purchase plans, and expand their educational efforts around company stock. Employers believe these initiatives will help attract, motivate and retain top talent, as employees will have the opportunity to own company stock, instead of making it a requirement."

Companies increasing education, communication

Hewitt found that 42 percent of companies are planning to do more to educate employees on the potential risk and reward of holding company stock. In addition, one-third of these organizations will increase educational efforts relating to how employee performance contributes to stock value, and 35 percent will develop more communication tools around how stock is used as a means of employee compensation.

"As compensation programs increase in complexity, it is more important than ever that employees truly understand all the details of their specific pay packages, as well as what they can do to maximize the benefits of their individual plans," said Abosch. "To that end, companies need to establish frequent communication to ensure employees are aware of their particular roles in improving total shareholder return."
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