More Workers receiving options Even part-timers sometimes get to share the wealth



Stock options aren't just for chief executive officers anymore.

Long traditional at Silicon Valley start-ups and in the upper echelons of corporate America, options are moving into the mainstream. PepsiCo Inc., Starbucks Coffee Co., NationsBank Corp., Chase Manhattan Corp. and BankAmerica Corp. are among companies that now grant stock options to their rank-and-file employees. Some offer options to part-time employees as well.

"There's no question it's a growing trend," said Ed Lawler, director of the Center for Effective Organizations at the University of Southern California.

The idea is to spur entrepreneurial thinking and give employees a piece of the action. Companies don't have to account for the options as a charge against earnings, making the benefit even more attractive.

"We wanted to give our associates the opportunity to participate in the success of the company; the feeling was that options recognize individual efforts in a meaningful way," said Jamie Pickrell, vice president of corporate affairs for NationsBank, which has granted companywide options twice since 1992.

Edward Graskamp, who specializes in executive compensation for the consulting firm Watson Wyatt Worldwide in Chicago, views broad stock option grants as part of an overall "shift in the currency of compensation in the U.S. from cash to stock."

"There are a whole bunch of ways you can get stock in employees' hands; options are the latest, trendiest way of doing it," Graskamp said.

Trendy, but not yet widespread. In a survey of almost 700 companies, Watson Wyatt Worldwide found that only 8 percent either gave stock options to hourly employees or planned to do so within two years. Almost half awarded the options to top executives.

For employees at growing companies in a bull market, the options are hard to beat as a benefit. Most firms don't shave cash compensation as a trade-off, Graskamp said.

At a Starbucks Coffee in the Dallas area, 28-year-old manager Mike Rogers isn't worried about a downturn. He's in it for the longer haul.

"Most companies in this kind of business will offer a bonus to managers and some kind of 401(k). But to go the next tier and offer a piece of the company -- pardon the pun, but I have much more of a vested interest in Starbucks," he said.

Rogers has been with Starbucks less than four years, but the company's Bean Stock program has already been good to him. He used profits from the first batch of options to make the down payment on his house.

A stock option is the right to buy a share at a given price, most often the market price on the date the option is issued. If the stock goes up in price, the employee can exercise the option and pocket the difference. If the stock price declines, the option becomes valueless.

In a plan such as Starbucks', the company annually decides a percentage of salary that will be equaled in stock options. The employee can exercise 20 percent of the options annually for up to five years -- called vesting -- and must exercise them within 10 years after the initial grant or lose them. The coffee retailer's plan is among the broadest: Even 20-hour-a-week employees share in it.

For instance, a Starbucks employee who makes $10,000 a year with a 14 percent grant would get the equivalent of $1,400 in options. At a $20 stock price, that's 70 shares. A $10-per-share increase would net the employee $700 if the options were exercised.

Instead of making annual grants, NationsBank has issued two broad grants, one in 1992 and another in 1996. To sales assistant Jeanne Richerson, in the company's Dallas funds management group, the options are "a great idea."

Her only regret: "I exercised far too soon" and watched as the share price rose and the stock split.

In a down market, though, stock options can be as worthless as last week's lottery ticket. Critics fret that employees don't really understand them, and they worry about what happens to morale when the stock price goes south.

Pub Date: 4/21/97

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