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Quick Takes: September 12, 2007
  

Public Companies Appear to Be Cutting Back on Stock Option Plans


The drop in public companies’ use of employee stock option plans comes in the wake of a number of ‘stock drop’ lawsuits involving the likes of Enron and WorldCom.
By Jessica Marquez

Opting out: Large public companies are backing away from employee stock option plans, while their private counterparts seem to be embracing them, according to a recent report released by the National Center for Employee Ownership.

One-third of the largest public companies that had employee stock option plans in 2004 have reduced the stock held in the plans to zero or closed them entirely by the end of 2005, according to the study. Meanwhile, from 2003 to 2006, the number of ESOPs has grown from 8,875 to 9,650, with 94 percent of these plans at privately held companies.
The drop in public companies’ use of the plans comes in the wake of a number of “stock drop” lawsuits involving the likes of Enron and WorldCom. In these cases, judges ruled that employers failed as fiduciaries of their retirement plans by allowing employees to have concentrated investments in company stock. Private companies, however, use ESOPs differently. They are usually a means for company owners to sell their stake to employees.
—Jessica Marquez


Jessica Marquez is New York bureau chief for Workforce Management.  E-mail editors@workforce.com to comment.


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