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I need info about stock options plan in US private companies
Hello and thank you for your question about stock options plans in US private companies! In short, there are many employees with stock options plans in the US, and these plans on average are worth about $19,470 per participant. Below you will find an in-depth explanation of these findings.
METHODOLOGY
We searched through corporate websites, industry reports, and trusted media sites to find information on stock options plans in US private companies. Specifically, we looked for statistics related to the number of employees with stock options plans, the average value of these plans, and the average ratio between plan value and salary. Furthermore, we limited our search to recent data and ignored data related to non-US companies and public companies. In order to give a full overview of stock options plans, we will also provide some information about what they are and why companies may choose to use them.
STOCK OPTIONS PLANS OVERVIEW
A stock options plan gives an employee the right to purchase a specific number of shares of company stock at a certain price over a set period (determined by the vesting schedule). These plans are especially popular among startups because they allow these companies to attract employees without "requiring a startup business to spend precious cash" (through higher salaries or cash bonuses). Stock options plans can be beneficial by "contribut[ing] capital to a company as employees pay the exercise price for their options." Unfortunately, the company also risks the "dilution of other shareholders’ equity when the employees exercise the stock options." A plan often issues "from 5% to 20% of the company’s outstanding stock" in total.
TYPES OF STOCK OPTIONS
Stock options plans can be classified either as outright award or performance-based award (also called incentive award). Generally, outright awards are taxed while incentive stock options are "not taxed when exercised." The plans can either "grant outright awards of stock options upfront or on a vesting schedule."
STOCK OPTIONS PLANS STATISTICS
When employees sell stock from their plans, they generally "receive an amount equal to between 12 and 20 percent of their salaries" in profit. In 2016 in the US, there were 9,615 stock options plans with 15.1 million participants and $294 billion employer securities. It is estimated that "less than 10 percent of plans are in public companies". Therefore, there are at least 8,653 stock options plans in private companies, with at least 13.59 million participants and $264.6 billion employer securities. By dividing the value of employer securities by the number of participants, we find that the average stock options plan is worth $19,470 per participant. However, this number may be inflated by the fact that "thousands of people have become millionaires through stock options" offered by successful companies. Nevertheless, in "2014, 19.5 percent of all employees working in the private sector reported owning stock or stock options in their companies." It is also interesting to note that since 2002, the number of stock options plans in the US has decreased "but the number of participants has steadily increased."
CONCLUSION
Stock options plans are attractive to both employers and employees, making them very popular in private US companies, especially startups. Their value generally ends up being 12-20 percent of an employee's salary.
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