The value of stock option grants at the largest U.S. corporations fell 32% to $40 billion in 2005 as companies cut back on the number of options granted and the number of employees receiving them, according to a study by Watson Wyatt Worldwide. The value of stock option grants per company dropped 33% to $29 million, with "the bulk of this reduction below the executive level," according to a statement about the study.
"Certainly, some reduction in stock option grants from the highs of the technology boom is healthy, but the pendulum may have swung too far," Ira Kay, global director of executive compensation consulting at Watson Wyatt, said in the statement. "Stock options can provide powerful motivation for employees to perform. As employees' potential income from options is reduced and not fully replaced by other programs, employers will have to think creatively to craft other performance incentives."
Watson Wyatt surveyed 793 companies in the S&P 1500 stock index.