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September 01, 2003
Microsoft Stock-Option Decision Not Swaying Others
Microsoft’s decision in July to end its stock-option program for employees in favor of restricted stock grants is not swaying other North American companies to follow suit, according to survey results reported by WorldatWork, a nonprofit consultant.

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Indeed, only 2 percent of survey respondents indicated that the Microsoft decision had a “significant effect” on their companies’ philosophy regarding stock options, WorldatWork reports.

A huge majority, 63 percent, said the announcement had no effect on their stock compensation philosophy; 25 percent indicated it had a minor effect; and 9 percent said it had "somewhat" of an effect.

In contrast to the Microsoft announcement, the possible mandating of stock option expensing by legislation or regulation would affect companies’ use of stock options. Only 13 percent of respondents said they would not change their current practices regarding employee stock options. Thirty-six percent (36%) said they would switch to restricted stock if they were forced to account for stock options as an expense. Other responses included scaling back stock option grants, using more cash as a reward, and shifting to other long-term incentives.

Sixty-one percent (61%) of compensation professionals believe stock options should not be expensed, compared with only 29 percent who felt they should. Eleven percent (11%) would support expensing under certain circumstances, such as through a fair and accurate valuation method. In response to a different question, 11 percent of companies had a shareholder proposal to expense stock options in 2003, with 42 percent of those proposals passing.

The survey, conducted in July 2003, polled 413 WorldatWork members who work in the human resources departments of the Fortune 1000 companies.

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