FINANCIAL PARTICIPATION
Survey of global stock option practices
Stock options are the main type of share stock plans offered by European multinationals, according to a new survey by Mercer Human Resource Consulting. The second most common approach is the stock purchase plan, although it is only widely used by UK-based companies.
The survey of 92 major European multinationals found that for companies with headquarters in Belgium, Denmark, Germany, Netherlands, Sweden and Switzerland, stock options are the principal, or only, stock plan used.
New accounting standards
Mercer warns that proposals by the International Accounting Standards Board (IASB) could change the trend. If its recommendations are accepted, companies will be required to record stock options in their profit and loss accounts. Organisations could appear less profitable as a result.
Piia Pilv, European principal at Mercer, said: "Emerging trends suggest that Europe is moving into line with the UK, where a variety of share stock plans are offered to employees. Companies that restrict their stock plan offering to options could face serious problems if the IASB's recommendations are accepted. They would be wise to start reassessing their reward packages now."
| Key findings of Mercer research |
While many stock plan design features tend to be uniform across Europe, only Germany, UK and Netherlands impose performance criteria on the exercise of options. Says Pilv: "In the UK, pressure from institutional investors encourages companies to practise good corporate governance. The Netherlands is looking to follow suit, with companies starting to implement guidelines, and it's likely the rest of Europe will move in this direction. Companies are facing increasing pressure from shareholders to justify the size of stock options granted to executives, and demonstrate how these link to company performance." |
European multinationals have started to modify global plan designs on a country-by-country basis to either improve local tax treatment or to avoid certain compliance requirements. Pilv said: "Across Europe, companies are realising that one design of global stock plan may not fit all. Global plans are typically modified in the UK, France, Canada and the US to qualify under local tax laws, leading to substantial tax savings for the local company and its employees. Improved tax treatment also provides an extra incentive for employees to participate in the company plan." |
Although there is an increased focus on localising global plan designs, the majority of European multinationals use English to communicate their stock plans to employees. |
Want to know more?
Title: 2002 Global Stock Plan Practices of European Multinational Companies Survey, Mercer Human Resource Consulting.
Sample size: The survey covers 92 major European multinationals with headquarters in Belgium, Denmark, Germany, Netherlands, Sweden, Switzerland and UK and 12 subsidiaries of foreign multinationals in Europe. The data was collected in April 2002.
Availability: For more information email: lizzy.stut@mercer.com.
Mercer Human Resource Consulting is a global firm that helps organisations create business value through their people . With more than 13,000 employees in some 40 countries and territories serving clients worldwide, the company is part of Mercer Consulting Group, a wholly owned subsidiary of Marsh & McLennan Companies, Inc.,
For more details visit Mercer online at www.mercerhr.com.
Posted 7 July 2002