February 09, 2001 (The Editor’s Desk is updated each business day.)

Stock compensation an old story

Equity compensation plans—plans that invest in or provide workers with company stock—are not new, although the variety of such plans has grown in recent years.

[Chart data—TXT]

Some common potential uses of company stock are in defined contribution retirement plans. Nearly half (47 percent) of full-time employees in private industry participated in a defined contribution program in 1997. The most widespread form of defined contribution plan was a savings and thrift program.

Nearly nine out of ten employees of medium and large employers who participated in savings and thrift plans in 1997 had the ability to choose investment options for their contributions. For 42 percent, the employer's stock was one of those options. It was increasingly likely that workers could also direct the investment an employer's matching contributions, but only 25 percent of workers had the option of directing matching funds into their employer's stock.

These data are from the BLS National Compensation Survey. Defined contribution plans are accounts set up for each participant, to which the employer and often the employee make fixed contributions; the retirement payment is not fixed, but determined by these contributions. Read more in "Putting Stock in Benefits: How Prevalent Is It?" (PDF 71K), by William Wiatrowski, Compensation and Working Conditions, Fall 2000.