NEW YORK |
NEW YORK Feb 10 (Reuters) ? If you?re a high-ranking
executive like Apple Inc CEO Tim Cook, company stock is your
best friend. He received a reported $375 million in restricted
stock for 2011, one of the largest pay packages on record.
If you?re one of the 99 percent, though, company stock will
likely be playing less of a role in your financial future in
years to come. That?s because many firms are trimming back on
broader-based equity ownership programs, such as employee stock
purchase plans (ESPPs) or including company stock as a 401(k)
investment option.
When it comes to equity rewards like options and grants,
it?s usually top executives who are cashing in. The rank and
file? Not so much. The number of employees nationwide benefiting
from some version of equity reward has fallen to around nine
million, down from roughly 12 million at the height of the
dot-com boom.
?Companies have been cutting back on who is eligible for
stock rewards, because compensation consultants have been
arguing for years that they should,? says Corey Rosen, senior
staff member at the National Center for Employee Ownership in
Oakland, California. ?Those consultants work for the board and
the CEO. And if someone is paying you, it?s very hard to go to
the CEO and say, ?You get too much, it would be better if you
spread stock around more broadly.??
In the Society for Human Resource Management?s Employee
Benefits Survey, for instance, only 10 percent of companies
report having stock-purchase plans (which give staffers the
opportunity to buy equity in the firm, usually at a significant
discount like 15 percent). That?s down almost half from 2008,
when 19 percent of companies did so.
And according to human resource consulting firm Aon Hewitt,
36 percent of employers offer company stock on the investment
menu of their retirement plans, down from 47 percent just two
years ago.
?That?s partly a reflection of risk to plan sponsors,
because there?s been a lot of litigation around company stock,?
says Pamela Hess, Aon Hewitt?s director of retirement research.
?A number of class-action lawsuits spun out of the Enron crisis,
when many employees lost all their savings because that?s what
they were invested in.?
Of course, given the highly volatile stock market of the
last decade, having less company stock in your portfolio is not
necessarily a bad thing for investors. In fact, most financial
planners would likely encourage it, since employees sometimes
slot too much of their retirement savings into company stock,
when given the option. When paired with ?career risk? ? the fact
that you work at a company and get your paycheck from it ? that
means a lot of your eggs might reside in a single basket.
?Many companies have been looking to reduce the amount of
employee assets in company stock, because of the diversification
issue,? says David Wray, president of the Profit Sharing/401(k)
Council of America. ?Some have actually put in a threshold, like
25 percent of your assets, beyond which you?re not allowed to
accumulate any more.?
It seems those efforts to reduce staffers? exposure to
company stock are succeeding. The percentage of employee
retirement-plan assets in company stock has dropped from 19
percent in 2001 to 10 percent today. And according to analysis
by mutual fund giant Vanguard Group, the percentage of plan
participants who are highly concentrated in company stock -
amounting to at least a fifth of their portfolio ? has fallen
from 42 percent in 2005, to 30 percent today.
Meanwhile, though, high-ranking executives continue to load
up on it. SP 500 CEOs each received an average of $2.6 million
in stock and $2.3 million in options in 2009, according to data
from the AFL-CIO and Salary.com.
Observers worry about the broader implications of those
diverging trends: The towering amounts of company stock awarded
to top executives, and the narrowing opportunities for mid- or
entry-level employees to get some skin in the game.
?The goal should be to get as many people involved as you
can,? says Rosen, singling out companies like Starbucks,
Southwest Airlines and Whole Foods for their commitment to
broad-based equity programs. ?It?s much better to spread equity
around, because it leads to lower turnover and better
performance.?
Source: http://paydayloans-uk.org/personal-finance-should-employees-own-more-company-stock-or-less/
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