LINCOLNSHIRE, IL: Major US companies plan to do a better job of communicating with employees about their stock option and employee stock ownership plans, according to a new study by consulting firm Hewitt Associates.The bear market on Wall Street, combined with media coverage of employees losing money on Enron stock, has left many employees increasingly disillusioned about the value of getting company stock as part of their overall pay package.
Hewitt found that 42% of the companies it recently surveyed plan to do more to communicate to employees the potential risks and rewards of owning company stock. Also, 35% of companies plan to communicate more about how stock is used as a means of compensation. One-third want to communicate more about how employee performance contributes to stock performance, the survey found.
"Companies need to establish frequent communication to ensure employees are aware of their particular roles in improving total shareholder return,
said Ken Abosch, a Hewitt business leader. "As compensation programs increase in complexity, it is more important than ever that employees understand all the details of their specific pay packages."
Don Kirchhoffner, VP of corporate communications with Exelon, said the study findings "(don't) really surprise me, not after all the massive publicity that Enron got.
Exelon's human resources department routinely creates brochures discussing the company's stock program.
Patrick Gallagher, an SVP at Edward Howard & Co. in Cleveland, noted that in the past, companies have been reluctant to communicate with employees about company stock out of concern they might run afoul of regulators accusing them of selectively disclosing key financial information to employees.
Companies have also worried that discussing their stock could be seen as giving employees financial advice - something that could make the companies liable if their stock doesn't perform as advertised.
But Gallagher said Enron and the bear market are changing those corporate attitudes. "There's a need for more financial education for employees,
See Market Focus, p.17.
COMPANY EDUCATION PLANS
- 42% of companies plan to do more to educate employees on the risks and rewards of holding company stock
- 33% will increase educational efforts on how employee performance contributes to stock value
- 35% will develop more communication tools regarding how stock is used as a means of employee communications
SOURCE: Hewitt Associates.