year.Thisisbackedupbythenationalcompensationsurvey
of the Bureau of Labor Statistics in March 2003, which
reported that about 8 percent of all employees received
optionsascompensation.Thenumberwasmuchhigherfor
white-collaremployees(about 12 percent)thanforblue-collar
employees (6 percent) and service employees (2 percent).
Notwithstandingrecentattemptstowidenoptiongrants,they
remainedheavilyloadedtowardtopmanagementatfirms.In
2002,forinstance,thevalueofoptionsgrantedtotheCEO
andthetopfivemanagersatS&P 500 firmsaccountedfor
about 9.5 percent of the total option grants.
3
ThedecisionbytheFinancialAccounting StandardsBoard
(FASB)torequireallcompaniestobeginexpensingoptions
startingin 2006 hasbeguntohaveaneffectonoptiongrants.
In2004,theIRRCreportedadropintheoptionoverhangat
all U.S. companies and noted that companies were
reexamining their option grant procedures in light of
stockholder disapproval.
Who Uses Options?
The IRRC study, quoted in the preceding subsection,
categorizedfirmsinto 10 economicsectorsandexaminedthe
magnitudeoftheoptionoverhangineachsector.Technology
companieshadthebiggestaverageoverhangof24.4percent
in2003,upfrom20.8percentinthepreviousyear.Utilityand
energycompanieshadthesmallestoverhang,averagingless
than 8 percentin2003.Thesedifferenceswidenedduringthe
technologyboominthelate1990s,withtheadventofInternet
andnewtechnologyfirms.HallandMurphy(2003),intheir
studyoftheproblemsassociatedwith theuseofemployee