TY  - JOUR
AU  - Oyer,Paul
AU  - Schaefer,Scott
TI  - Why Do Some Firms Give Stock Options to All Employees?: An Empirical Examination of Alternative Theories
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10222
PY  - 2004
Y2  - January 2004
UR  - http://www.nber.org/papers/w10222
L1  - http://www.nber.org/papers/w10222.pdf
N1  - Author contact info:
Paul Oyer
Graduate School of Business
Stanford University
518 Memorial Way
Stanford, CA 94305-5015
Tel: 650/736-1047
Fax: 650/725-0468
E-Mail: pauloyer@stanford.edu

Scott Schaefer
University of Utah
E-Mail: scott.schaefer@utah.edu
AB  - Many firms issue stock options to all employees. We consider three potential economic justifications for this practice: providing incentives to employees, inducing employees to sort, and helping firms retain employees. We gather data on firms' stock option grants to middle managers from three distinct sources, and use two methods to assess which theories appear to explain observed granting behavior. First, we directly calibrate models of incentives, sorting and retention, and ask whether observed magnitudes of option grants are consistent with each potential explanation. Second, we conduct a cross-sectional regression analysis of firms' option-granting choices. We reject an incentives-based explanation for broad-based stock option plans, and conclude that sorting and retention explanations appear consistent with the data.
ER  -