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Changes In Equity Compensation Plans: Evidence From The U.S. Capital Markets

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  • Rogelio J. Cardona

Abstract

The Financial Accounting Standards Board and the United States Congress enacted new legislation and regulations in 2002 requiring corporations to recognize stock option grants as an expense (voluntarily) on their financial statements. In 2004 option, expensing became mandatory. This paper describes the different changes made by a sample of U.S. public corporations to their Equity compensation plans after the mandatory expensing of stock options went into effect. The results suggest that firms seem to have reacted to the required option expensing by accelerating the vesting of their outstanding options with a contemporaneous reduction in the use of stock options as a compensation incentive. Executive (employee) compensation practices seem to have shifted from stock option grants to performance and restricted stock awards. An unexpected finding of this investigation was observing that besides employees and Board directors, non-IT firms are also granting equity compensation to non-employees such as vendors and consultants.

Suggested Citation

  • Rogelio J. Cardona, 2011. "Changes In Equity Compensation Plans: Evidence From The U.S. Capital Markets," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 5(2), pages 41-52.
    • Handle: RePEc:ibf:gjbres:v:5:y:2011:i:2:p:41-52
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    More about this item

    Keywords

    Equity compensation plans; stock options; performance stock; restricted stock;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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