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Top 10 Best Practices in HR Management
HR professionals have the opportunity to play a more strategic role in the business by keeping up to date with the latest HR innovations--technological, legal, and otherwise. This special report will discuss how HR managers can anticipate and address some of the most challenging HR issues this year.
Topics in this special report include:
- Healthcare in 2012
- FMLA Paid Leave Initiatives
- Ethics
- Social Media
- Environmental Responsibility
- Workplace Wellness
- Classifying Employees
- Retirement of Baby Boomers
- Identity Theft
- Communications
Make sure you have the information you need to know about these current HR challenges and how to most effectively manage them in your workplace.
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March 01, 2001
Are Stock-Based Incentives Losing Their Luster?
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ALIGN="JUSTIFY">Stock options may have been the buzzword of the '90s in compensation circles, but when the new millennium dawned, it was the recipients of these once lucrative pay packages who suffered the worst hangovers.
According to a recent article in The Wall Street Journal, both executives and rank-and-file workers at many dot-com firms have even begun to push for a distinctly non-cutting-edge form of compensation - cash.
The change is most noticeable among Internet executives. Amazon.com, for example, recently paid its CFO and vice president of operations $1 million cash bonuses in addition to their existing compensation packages, already generously laced with stock. Considering that some Internet companies have seen their stock prices slide as much as 90 percent, who can blame dot-com workers for wanting something they can put in the bank?
Still Better Off
Despite what appears to be a loss of luster for stock-based incentive compensation plans, a recent survey by Hewitt Associates reveals that organizations with stock-based plans are still, by and large, better off. How so?
Hewitt ranked the 173 participating organizations, using the ratio of the firm's stock-based incentive compensation to its market value. The results found that over the last five years, the top 50 percent of these companies had an average of 16 percent higher cumulative total shareholder return than the rest. When the data were broken down further to compare top quartile versus bottom quartile companies, the five-year difference averaged more than 65 percent.
What Makes a Stock-Based Plan Work?
According to Hewitt, successful stock-based incentive compensation plans share three critical variables:
- Shared investment. The plan will only achieve its goals if employees perceive themselves as having a common stake in the overall success of their company.
- Information and training. Companies that provide their employees with business information they can understand are much more likely to obtain their cooperation and support.
- Influence. Every employee at some point asks himself or herself, "What can I do to make a difference?" If employees don't have an opportunity to make an impact on the company's bottom-line results, they're never going to feel like true participants in its survival.
"All of these variables must work in concert to help create a dynamic ownership environment and in-creased shareholder return," points out Hewitt ownership consultant Mike Butler.