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June 29, 2005
CEOs See Fewer Stock Options, But ...

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The nation's largest companies granted fewer stock options to chief executive officers again in 2005, but the value of the options increased for the second consecutive year, according to an analysis by Watson Wyatt, a human capital consulting firm.

The firm found that the number of stock options awarded to CEOs declined 16 percent in 2005. That follows a 7 percent decline last year.

However, the economic value of stock option grants increased nearly 7 percent this year, following a slim 1 percent increase in 2004. Previous analyses showed declines in both the number and the value of stock option awards in 2002 and 2003. The 2005 analysis is based on information from SEC filings at 42 of the nation's largest companies.

"The heyday of stock options is clearly over," says said Ira Kay, global director of executive compensation consulting at Watson Wyatt. "In place of options, companies are favoring other long-term vehicles, such as performance-based incentives and restricted stock awards, to keep executives motivated and excited."

Kay noted that the improvements in the economy, corporate performance, and stock price all contributed to the jump in 2005 stock option value.

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