...employee stock option plan (also called a share-based compensation plan) is a compensation arrangement (award) established by a corporation. Under this plan, its employees, in exchange for their services, receive shares of stock, share options, or other equity instruments (or the corporation incurs liabilities to employees in amounts based on the price of its stocks). Mr. Lay’s option plans were considered as compensatory. A noncompensatory employee plan (share purchase plan) is designed by a corporation to raise capital or to obtain more widespread employee ownership of the corporate stock. Three criteria must be met for a share option plan to be noncompensatory: 1. Substantially all employees who meet limited employment qualifications may participate in the plan on an equitable basis. 2. The discount from the market price does not exceed the per-share amount of stock issuance costs avoided by not issuing the stock to public. A purchase discount of up to 5% automatically complies with this criterion. 3. The plan has no option features other than the following: (a) employees are allowed a short time (no longer than 31 days) from the date the purchase price is set to decide whether to enroll in the plan, and (b) the purchase price is based solely on the market price of the stock on the purchase date, and employees are permitted to cancel their participation before the purchase date and obtain a refund of any amounts previously paid. If all these criteria are met, the plan is a...
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...employee stock options as a motivator? Ans: Employee Stock Options (ESO): An employee stock option is a contract issued by an employer to an employee to purchase a set amount of shares of company stock at a fixed price for a limited period of time. A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not generally traded on an exchange, and there is no put component. Furthermore, employees typically must wait a specified vesting period before being allowed to exercise the option. Types of Employee Stock Options: There are two broad classifications of stock options issued: 1: Non-qualified stock options (NSO) 2: Incentive stock options (ISO). Practical Consequences Explanation: The idea behind stock options is to align incentives between the employees and shareholders of a company. Shareholders want to see the stock appreciate, so rewarding employees when the stock goes up ensures, in theory, that everyone is striving for the same goals. Critics point out, however, that there is a big difference between an option and the ownership of the underlying stock. If the stock goes down, the holder of an option would lose the opportunity for a bonus, but wouldn't feel the same pain as the owner of the stock. This is especially true with employee stock options...
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...Summary 3 Introduction 4 Research Findings 5 Stock Options 5 Tuition Reimbursement 6 Merit Plans 7 Conclusion 8 References 10 Executive Summary In a business the main focus is become as successful as possible. In order to gain success and maintain the success a business must have a reliable and dependable staff. With this being said it is important to compensate employees to maintain and develop the best work performance possible. The success of the business is depended on the employees. Research has been done on three compensation strategies that benefit the employees and company, those three compensation strategies are implementing stock options, tuition reimbursement, and merit plans. Stock options benefits have been known as an attractive way to reward employee performance. It is important for the organization to claim the stock options to be capitalized on the balance sheet so shareholders can track EPS, which in return is beneficial to the organization as well. This compensation benefit has been around for decades and continued to grow until the increase in accounting rules in 2001. With more rules implemented it allows for the companies to maintain a fairness in the workplace. This option should be offered to all employees but is not require for the employee to exercise. The beginning step to be made for the organizations is to determine at what price the employee may purchase stock options at and for what timeframe. Tuition reimbursement...
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...For many of us, finding a career that we deem fun and long-term is in itself a long journey. But having a successful career in life is not just for the rich and famous, it's also for the average person. We as humans are prone to look at successful individuals like Oprah or Bill Gates and assume that somehow they became wealthy and innovative overnight, but it truly took many years, time, effort, and perseverance. Choosing a career is an involved process that is based on a number of things, including your interests, skills, work-related values, and personality. And of course salary and bonuses take not the last place in our decision. I am doing my MBA program and I have to choose the field in which I will devote my life. I am interested in marketing, finance and HR, that is why I decided to compare these tree fields. The difference in salaries and bonuses are explained by level of responsibilities, PART 1 The difference in salary between International Marketing Manager; Financial Analysis Manager and Human Resources Manager is not so significant, but the field of activities is totally different. It is not surprising that international marketing manager is paid more than others. The median salary for international marketing manager is $101,484; for financial analysis manager is $98,905; for human resources manager $85,863 (10001, NY). In my opinion, in this case the main factor that can explain the difference in the salaries is your responsibilities. PART 2 Benefit...
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...were residents of the State of Georgia. Plaintiff Donald Schroerlucke is a former employee of WorldCom, Inc. In 1989, Mr. Schroerlucke was employed as Vice President of Operations at Long Distance Discounts Services, Inc., the predecessor corporation to WorldCom. Pursuant to stock option agreements with Long Distance Discount Services, Inc., and then with WorldCom, Mr. Schroerlucke accumulated employee stock option grants between July 1991 and January 1998. Mr. Schroerlucke’s employment with WorldCom ended on January 4, 1999, at which time his stock options became fully and immediately vested according to the terms of the stock option agreements and an April 7, 1998 memorandum titled, “WorldCom Employee Stock Option Program,” once his employment ended, Mr. Schroerlucke was required to immediately exercise all of his employee stock options. The April 7, 1998 memorandum stated in part: “Please note that under WorldCom Inc. 1997 Stock Option Plan, all vested options must be exercised prior to termination with the Company.” After a final stock option grant award on January 2, 1998, Mr. Schroerlucke had accumulated 172,492 WorldCom stock options. Mr. Schroerlucke exercised all of his existing stock options on February 12, 1999, at which time the market value of his 172,492 WorldCom shares was 13,702,333.25, based on the...
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...Seminar Human Resource Management (HR 491) Position Paper STEVEN H. HALL Computer Science Corporation a Global Leader in Technology Park University of Alexandria, Virginia 5 December 2010 2 TABLE OF CONTENTS Page Introduction . . . . . . . . . . . . . . . . 3 Body . . . . . . . . . . . . . . . . . . 4 Competitive Advantage . . . . . . . . . . . . 4 Change Management . . . . . . . . . . . . . . 5 Diversity Management . . . . . . . . . . . . . . 7 Recruitment and Selection. . . . . . . . . . . . . 9 Compensation and Benefits . . . . . . . . . . . . 11 Organizational Climate . . . . . . . . . . . . . 12 Conclusion . . . . . . . . . . . . . . . . . 13 Cited References . . . . . . . . . . . . . . 15 2 3 INTRODUCTION This position paper explains how and why Computer Science Corporation (CSC) is global leader in providing technology solutions and services through three primary lines of business: (1) Business Solutions and Services; (2) Global Outsourcing and Services; (3) North American Public Sector. CSC capabilities include systems design and integration, information technology and business...
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...Short term incentive plans are rewards that recognize the executive’s progress toward fulfilling competitive strategy goals. Short term incentive compensation programs usually apply to group of select executives in a company. The plan applies to more than one executive because of the synergy that comes from the efforts and expertise of executives has an influence on corporate performance. There is a board of directors that determine the amount of the short term incentive award that will be given to each executive and it all depends on their ranking in the company and their compensation level. The CEO will receive a larger performance award than an executive who is the CFO or the Vice President because their position is at a lower level in the structure of the company. Some of the things that can affect an executives short term incentives are changes in profits, changes in value of stock and reduction in costs. Stock compensation or deferred compensation is an agreement between an employee and the organization to pay an employee at a future date. According to our text book this is a hallmark of an executive compensation package. Deferred compensation creates a sense of ownership that aligns the interests of the executive with those of the owners or shareholders of the organization for long term purposes. The amount of this long term incentive varies for every CEO. It also provides tax advantages; if they defer payments until they retire their payments will have a lower taxation...
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...Table of Contents Executive Summary………………………………………………………………………………………………………………….3 Introduction…………………………………………………………………………………………………………………………….5 Research Findings…………………………………………………………………………………………………………………….6 Bonuses…………………………………………………………………………………………………………………...................7 Sales Commissions……………………………………………………………………………………………………………………8 Medical Benefits………………………………………………………………………………………………………………………11 Retirement Benefits………………………………………………………………………………………………………………..12 Stock Options………..………………………………………………………………………………………………………………...13 Recommendations……………………………………………………………………………………………………………………14 Conclusion………………………………………………………………………………………………………………………………..15 Reference…………….……………………………………………………………………………………………………………………16 Executive Summary Employee Compensation Strategies There are many ways a company can compensate an employee for their contribution to the organization. Companies offer a wide range of bonus/commissions to employees so that they can share in the company’s success. They come as cash and non-cash awards. Many corporations use profit sharing as a way to motivate an employee to work harder so they sell more. Bonus/commissions range from 2.5% - 7.5% if the corporation earns a profit. Spot bonus awards can be for providing exceptional customer service. They can be a gift card to a movie discount retailer, or cash. Recognitions are announcements in front of other employees. Sales commissions awards from the sales department when...
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...of the firm. • Employee stock plan: A plan through which employees are provided with option to purchase shares in their employer at a fixed price within a limited time period. • Long term incentives: A type of performance pay in which the incentives are tied to an organization performance horizon that ranges beyond one year, often three years to five years. The basic aim of organizational performance pay is to promote organizational citizenship behaviour, membership behaviour and positive group norms. As in the case of Fit Stop we can clearly see that they will be trying to follow the high involvement management style as they want their employees to be motivated so they can provide exceptional service to the customers. In this case the organizational performance pay is optimal because it will motivate the employees to do whatever it takes to work effectively and efficiently so that they can achieve the organisational goal. The organizational performance plan that is most appropriate according to my knowledge is employee stock plan. As the company is in its initial stage and it will take time to establish its place in the market and start earning profit, the profit sharing plan will not motivate the employees to an extent and even if it will create a temptation for the employees, there will be a liability on the company which is still in its initial stage, actually not good for the reputation of the company too. Through employee stock option plan, employees will have the ownership...
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...picked one up. It was going to be a long day, but I felt good that all the products and services I'd used so far had come from companies where the employees were substantial or principal owners. Why Employee Ownership Is Popular There are a number of reasons for the popularity of employee stock plans. ESOPs provide attractive tax benefits. They allow companies to borrow money and repay it in pretax dollars. They provide a way for owners of closely held businesses to sell all or part of their interests and defer taxation on the gain. And they make it possible for companies to provide an employee benefit simply by contributing tax-deductible shares of their own stock, among other benefits. Broadly granted stock options do not provide special tax benefits but give growing companies a way to compensate employees with equity rather than more cash. Putting company stock in 401(k) plans provides a less expensive way for companies to match employee deferrals than matching in cash. Employee stock purchase plans (often called Section 423 plans, although not all such plans fall under this part of the tax code from which the name derives) allow employees to put aside part of their paychecks to buy stock, usually at a significant discount. Just as important, however, are potential productivity gains. Studies consistently show that when broad employee ownership is combined with a highly participative management style, companies perform much better than they otherwise...
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...business strategy influences the firm's compensation systems in hightechnology firms. For the firm strategy variable, we used innovation strategy, which is one of the most critical business strategies in the high-technology industry. Our analysis showed that a firm's emphasis on innovation is positively related to the firm's employee pay level, both short-term pay and long-term pay. Moreover, a firm's emphasis on innovation has significant influence on several other aspects of employee compensation management. Innovation is positively associated with the difference in pay level between R&D employees and other employees, time orientation of employee compensation (the relative emphasis on long-term pay to short-term pay), and the length of the stock option vesting period. The influence of innovation is significant after controlling for industry membership. Keywords organization, performance, practices, research, firm, industry,...
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...market repurchases and employee options Kathleen M. Kahle* Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, PA 15260, USA (Received 20 September 2000; accepted 6 June 2001) Abstract This paper examines how stock options affect the decision to repurchase shares. Firms announce repurchases when executives have large numbers of options outstanding and when employees have large numbers of options currently exercisable. Once the decision to repurchase is made, the amount repurchased is positively related to total options exercisable by all employees but independent of managerial options. These results are consistent with managers repurchasing both to maximize their own wealth and to fund employee stock option exercises. The market appears to recognize this motive, however, and reacts less positively to repurchases announced by firms with high levels of nonmanagerial options. JEL Classification:G30, G32 Key Words: share repurchase, executive stock options, employee stock options I thank Ken Lehn, Frederik Schlingemann, Kuldeep Shastri, René Stulz, Shawn Thomas, Cynthia von Skansen, Ralph Walkling, and an anonymous referee for helpful comments and suggestions. Tomas Jandik and Gang Hu provided excellent research assistance. * Tel.: 412 648 1519, Fax: 412 648 1693 E-mail address: kkahle@katz.pitt.edu 0304-405X/00$-see front matter © 2002 Elsevier Science S.A. All rights reserved 1. Introduction Early studies of open market stock repurchases document positive...
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...which Alliston have set for their employees did not have any objectives for their production and performance tasks. The purpose of their incentive plan was to focus and align the organization by communicating and rewarding the achievement of company goals. In my view, Alliston Instruments should have implemented a compensation mix strategy. It would have allowed them substantial portion of compensation to be allocated to short-term incentives and long-term equity incentive, i.e., percentage of pay allocated between base pay and short-term incentive and long-term equity incentive pay. The base salary of the employees should have based on external market data, internal equity value, and performance of the company and in the end an individual performance. In terms of short term incentive Plans Company should have criteria in which the overall performance of an employee should be measured on different tasks and should set up minimum performance targets. This way employee would work hard and will not compromise with the quality of the products. In return, the short term incentive plans varies company to company, however the minimum incentive plans generally comprises 10-20% of the base of total direct compensation. Based on my study I recommend that Alliston should also introduce the annual incentive plans, the results of which should be measured in respective of total quality performance of the company. This strategy will help Alliston to be consistent in their...
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...Analysis of JetBlue Airways JetBlue Airways is a young airline that is very successful and is also growing rapidly. In this analysis, the human resource strategies, policies, and practices will be reviewed and analyzed with suggestions as to how human resources practices and equal opportunity employment law relates to JetBlue and how these practices and laws can be beneficial to all of the organization's human resources areas but also how they can be beneficial to JetBlue as an organization with a bright future. Hiring Practices JetBlue already has impressive hiring practices because they focus on finding the right people with great attitudes. However, there are three national equal employment laws that have been identified that will impact JetBlue's hiring practices. The first law identified is the Age Discrimination Act of 1967 which prohibits "employers from discriminating against individuals who were 40 to 65 years old" (Mondy, 2012). In making sure not to discount hiring people over the age of 40 whether they have previous airline experience or not can benefit JetBlue as an organization because many workers that are over the age of 40 have a great work ethic along with great customer service skills as noted by CVS executive, Stephen Wing (Mondy, 2012). This also creates diversity in the workplace which only enhances the organization. The second law identified is Title VII of the Civil Rights Act of 1964 that was amended in 1972. Title VII prohibits an employer...
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...Introduction This memorandum addresses our recommendation for Product Data Management and Visionary Design System employees. First, it states the principal and agent relationships. Second, it addresses the sources of problems with PDM. Third, it discusses solutions and recommendations for PDM and VDS employees. Finally, it discusses other organizational changes and concludes with a summary of our recommendations. Principal-Agent Relationships The PDM software provides organizational efficiency for VDS. As a result, the VDS executives serve as the principal and PDM is the agent. The executives of VDS pride themselves on working closely with the customers and departments as well, therefore, VDS serves as agents to customers. VDS has the greatest potential to achieve a great competitive advantage because it captured a large portion of the market from its previous services. As a result, VDS has the advantage of the opportunity to explain its extensive benefits for consumers’ design process during its consultations. PDM needs VDS’s respected brand in the market and it has the technological advances to bring in greater revenue for VDS as a whole. Sources of Problems with PDM VDS’s advantage develops from its consultation advice and the benefits and simplicity of the PDM software; however, without the cooperation and understanding from the Sales Representatives, this advantage fails. The consulting services were first cut to save money, but without them, the PDM service...
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