Broad Stock Option Companies Grow Faster

A new study by Coopers and Lybrand has found that companies that grant stock options broadly grow faster than those that do not. The study was based on interviews of CEOs of 434 companies with annual sales between $1 million and $50 million that had been identified in the media as the fastest growing firms in the U.S. The study found that companies that offer stock options at any level grew 31.7% the previous 12 months, while companies that did not offer options grew 22.7%. Companies that offer options to non-executive employees grew 37.1%, compared to 24.6% for those offering options only to executives. The CEOs' projected revenue growth for next year in the broad option companies was 40.3%, compared to 24.3% in the companies with more limited options. Fifty-five percent of the high growth companies offering stock options provide them to non-executive employees, 29% offer options to all employees, and seven percent offer them to over half the employees.

Companies planning to be acquired or go public are much more likely to offer options. Of the 83% of the companies planning to stay closely held, 30% offer options; 85% of the companies planning to go public or be sold offer options and 65% of these companies offer options to non-executive employees.

These data need to be viewed with caution. The sample is very narrow, and there is no way to tell if offering broad options causes greater growth or if faster-growing companies are simply more likely to offer broad stock options. Nonetheless, they do add to a growing body of evidence that more companies, especially in high-growth fields, are giving out stock options to more people than ever before.