WORRIES OVER DILUTION, NOT EXPENSING, DRIVING OPTIONS SCALEBACKS: Despite a booming stock market, three-quarters of Standard & Poor’s 500 companies surveyed said that they are planning to shift away from stock options, but not as a result of expensing, according to a survey by Deloitte & Touche — rather, they’re running out of shares for option grants.
Two-thirds (67 percent) of the 165 companies in the Deloitte survey indicated that they would run out of shares within 24 months. As a result, companies will need to get investor approval to issue more shares this spring when most businesses hold their annual meetings, or at the same time next year. However, Deloitte noted that leading institutional investors, such as Vanguard and TIAA-CREF, are increasingly voting against company proposals to issue shares for long-term compensation plans because of stock dilution concerns.
And some 29 percent of senior human resources executives from 165 Standard & Poor’s 500 companies polled have already made cuts in the most recent grant cycle, and 17 percent have eliminated stock options altogether, D&T reported.
According to the report, middle managers and rank-and-file employees are seeing the biggest cutbacks. While one-third of respondents are making across-the-board cuts, 48 percent are limiting option grants to management and/or executives. More than half (51 percent) will no longer make option grants to exempt employees, while 54 percent will no longer issue options to non-exempt employees.
Respondents currently are considering a wide range of alternatives to replace stock options, including cash, restricted stock, phantom stock and stock appreciation rights.
MERRILL LYNCH PURCHASES EXECUTION AND CLEARING UNIT: Financial services conglomerate Merrill Lynch agreed to purchase the U.S. equities and options execution and clearing unit of ABN AMRO. Terms of the transaction were not disclosed.
Four divisions comprise the unit: options clearing, options execution, equity execution and correspondent clearing.
The transaction, which is expected to close in the second quarter, would accelerate Merrill Lynch’s efforts to build its options clearing business, expand its institutional client base, and enhance the services provided to clients in these key businesses.
SURVEY SAYS LACK OF INFORMATION DETERS WORKERS FROM RETIREMENT PLANNING: Many workers may let their lack of information about 401(k) plans and retirement planning and fear of the stock market prevent them from investing for retirement, according to a survey commissioned by Nationwide Financial.
“Many people don’t have a realistic picture of their retirement needs, and what they don’t know can hurt them,” said Michael Butler, senior vice president of NFS Distributors Inc., a division of Nationwide Financial.
The survey of 2,600 workers, conducted by consumer market intelligence firm BIGresearch, looked at three groups: workers who currently participate in a 401(k) plan, workers who have access to a plan but don’t contribute to it, and workers who are uncertain if their employer offers a 401(k) plan.
Among workers surveyed who have access to a 401(k) plan but choose not to participate, 42 percent said that they don’t contribute because they can’t afford it, 12 percent say that they have more pressing saving priorities, and 22 percent say that they plan to invest, but haven’t gotten around to it yet. In addition, 17 percent said that they’ll never stop working and don’t plan to retire, almost 30 percent said that they’re counting on Social Security to be the largest source of funding for their retirement, and 20 percent plan to use “other personal savings,” Nationwide reported.
Respondents who are uncertain if their employer offers a 401(k) plan cited not knowing what a 401(k) plan is as their greatest reason for not finding out if their employer offers one (29 percent).
Among workers who are participating in a 401(k) plan, many don’t understand some common investing terms, such as “asset allocation,” according to the poll. Almost half (48 percent) believe that it has to do with taking advantage of a company match, while others think that it’s about choosing a percentage of salary to invest or having money taken out of their paycheck to go into a 401(k) plan.
