also toemployees allthrough theorganization, makingthe
totalofoptiongrantsmuchlarger.Thethirdisthatsomeof
the smaller firms have used options as currency to meet
operating expenses and pay for services.
Marketwide Trends
Wecanpointtoanumberofdifferentstatisticsthatshowthe
growthinequityoptioncompensation.Thesimplestmeasure
isthenumberofemployeeoptionsoutstandingasapercentof
thetotaloutstandingshares,alsocalledtheoptionoverhang.
The Investor Responsibility Research Center (IRRC), an
independent watchdog for shareholders, estimated that the
overhangwas 17 percentfor the1,500 companiesittracks
(includingtheS&P500,mid-cap,andsmaller-capstocks)in
2003,upfrom15.7percentinthepreviousyear;themedian
valuefortheoverhangwas16.3percent,upfrom14.8percent
in the prior year. Figure 11.1 graphs the overhang, as
computed by the IRRC, from 1997 to 2003.
FIGURE 11.1Option Overhang at U.S. Companies
Source:Investor Responsibility Research Center (IRRC).