Stock Options Are Making a Comeback

Here’s an interesting statistic: only 14% of families own stocks, which means that more families own cats (30%) than stocks. I don’t own either…anymore. I think my personal history with stocks is similar to that of most people; meaning, I dabbled in stock ownership at one point in my career, but eventually it turned out to be worthless. It was the late 90s, and the company I was working for gave me 1,000 shares of stock as a reward for good performance. Today we would call it a “start-up” but back then, it was just a new, small company that was strapped for cash, so they gave us stock as a financial incentive.

There I was with 1,000 shares of stock that wouldn’t mature for an entire year, which meant that I could not sell them, trade them, or cash them in for a full year. I watched the exchange almost daily as the stock hit record highs, and I would calculate how much money I would get if I could sell them. I was going to be rich. My coworkers and I would fantasize about the stock splitting and the company being acquired by Microsoft. We had big plans, but then…the bottom fell out.

After a series of poor investments, bad loans, and failed product launches, the company started to decline. And ironically enough, just a few weeks before that stock was to become fully vested, the company went bankrupt. In the end, I got a check for something like $200 bucks.

In the early 2000s, we experienced the “dot com” boom and subsequent implosion. The stock market tumbled, and many people lost a lot of money. Investor confidence was low, and shortly after that, September 11, 2001 (“9/11”) happened, and then we hit an economic recession. And just like that, using stock options as a competitive financial alternative was pretty much over.

Offering stock options became popular in the 1950s as a compensation benefit to get employees to buy into the company’s agenda, perform at high levels, and feel like they weren’t just workers but co-owners. The idea is that by giving employees stock options, you are giving them a stake in the company, so obviously they will be more invested in the organization. But when the economy is struggling, the ability to offer stocks as a compensation or incentive doesn’t go over too well.

That was then and this is now. More people are finding new jobs these days, wages are starting to increase, consumer confidence is up, and job growth is expected to continue to rise. Many of today’s jobs and products didn’t even exist 10–15 years ago. The start-up company is very attractive now, and job seekers don’t mind taking a smaller salary in order to work for one, in exchange for an ownership stake.

It’s more than fair to say that the market is back. In February of 2015, the Dow Jones Industrial Average closed at a record high with over 18,000 points, and the S&P 500 closed with over 2,100 points. This is a strong sign that investing is back. According to an article on Inc.com by Jeremy Quittner, “Why 2015 May Outpace 2014 for IPOs” (initial public offerings), nearly 600 technology companies with a minimum value of $100 million are expected to hit the stock market. That would be the most since 2000.

It makes great business sense to use stock options as a viable benefit and job incentive, because the economic climate is better and job seekers are more open to the idea of stock as a form of compensation today. It’s an excellent way to attract new employees, increase the loyalty of current employees, and save cash for other business projects.