Table: The Options Sweepstakes

TABLE 4.1

The Options Sweepstakes

Value of Stock Options Held or Exercised by High Tech 100 Employees

As of the market's top in March, 2000:
Paper profits* $175 billion ($1 million per employee)
Actual profits** $53 billion ($300,000 per employee)
As of July, 2002:
Paper losses*** $130 billion ($970,000 per employee)
Remaining paper profits $4.5 billion ($25,000 per employee)
From vested options $3 billion ($17,000 per employee)
From unvested options $1.5 billion ($8,000 per employee)
Actual profits**** $25 billion ($125,000 per employee)

NOTES: *Value of outstanding options whose exercise price was above the company's stock price at the time.

**Profits on options exercised prior to 2000

***Loss since March, 2000 on options whose exercise price was below the company's stock price in July, 2002.

****Profits on options exercised in 2000 or 2001

SOURCE: Authors' analysis of SEC filings

TABLE 4.2

Who Owns the High Tech 100

Average Potential Ownership Stake as of December 31, 2000, by Type of Owner

Stock(%) Option(%) Total Equity(%)
Employees* 2 17 19
Top Five Officers 10 4 14
CEO 7 2 9
Other Four 3 2 5
Total Equity of Employees and Officers 12 21 33
Directors** 8 1 9
Total Insider Equity*** 20 22 42
Public Shareholders 58 0 58
Total 100

NOTES: *Excluding top five officers. Stock holdings include estimated purchases through employee share purchase plans.

**Includes stock owned by companies, such as venture capital firms, with which directors are affiliated.

***Employees, top five officers, and directors

All three columns are calculated as if all options, both vested and unvested, had been exercised, i.e., on a post-dilution basis.

The first column shows the percent of the High Tech 100's stock each group would own under this post-dilution scenario.

The second shows the percent of stock each group's options would represent.

The last column combines the first two to show each group's total potential ownership stake, including their diluted stock plus the stock they would have received if they had exercised all their options.

SOURCE: Authors' analysis of SEC filings.

TABLE 4.3

How Founders Share the Wealth

While a Few High Tech 100 Founders Still Hold the Bigger Stake...
Company Founder Founder's Total Equity* (%) Employees' Total Equity* (%)
Microstrategy Michael J. Saylor 43 18
Infospace Naveen Jain 24 15
ebay Pierre Omidyar 23 11
CMGI David S. Wetherell 10 7
...Many Have Given More to Employees
RealNetworks Robert Glaser 25 26
Amazon Jeffrey P. Bezos 21 24
Siebel Systems Thomas M. Seibel 11 26
Patricia P. House 1
Freemarkets Glen T. Meakem 10 18
Doubleclick Kevin J. O'Connor 7 13
Dwight Merriman 3
Akamai F. Thomson Leighton 6 12
Yahoo David Filo 6 19
Jerry Yang 4
Juniper Networks Pradeep Sindhu 4 17
WebMD Jeffrey T. Arnold 2 24
E Trade William A. Porter 2 9
AOL** Stephen M. Case 2 17
Lycos*** Robert Davis 2 14

NOTES: *All outstanding shares and all options on December 31, 2000, after dilution, i.e., assuming that all the options had been exercised.

**Before merger with Time Warner Incorporated

***Before merger with Terra Lycos

SOURCE: Authors' analysis of SEC filings.

TABLE 5.1

The Annual Option Spigot: High Tech Workers Get More Than Their Bosses

Share of the High Tech 100's total equity granted as options each year

Employees' Share % Top Officers' Share % Total %
1997 8 1 9
1998 8 1 9
1999 7 1 8
2000 6 1 7
2001 4 1 5
Average 7 1 8

NOTES: All outstanding shares and all options after dilution, i.e., assuming that all the options had been exercised.

Employees refers to everyone but the top officers, who are the five highest-paid executives at each company.

SOURCE: Authors' analysis of SEC filings

TABLE 6.1

The Dilution Public Shareholders Face From Employee Options

Average ownership shares of the High Tech 100 as of December 31, 2000

Stock before Dilution (%) Options after Dilution (%) Total Equity after Dilution (%)
Public Shareholders 74 0 58
All Insiders* 26 22 42
Employees** 3 17 19
Top Five Officers 13 4 14
CEO 9 2 9
Other Four 4 2 5
Directors*** 10 1 9

NOTES: *Total holdings of employees, top five officers, and directors.

**Excluding top five officers. Stock holdings include estimated purchases through employee share purchase plans.

***Includes stock owned by companies, such as venture capital firms, with which directors are affiliated.

The first column shows the percent of the High Tech 100's stock each group owned, before any outstanding options are exercised.

The second shows the percent of stock each group's options--both vested and unvested--would represent if they all had been exercised.

The third shows the percent of the stock, both from direct purchases and from options, that each would have owned if all outstanding options had been exercised.

SOURCE: Authors' analysis of SEC filings

TABLE 7.1

How Risk Sharing Pays Off for Companies and Their Shareholders

Performance Measure Gain from Partnership Capitalism
Total shareholder returns 2 percentage points
Productivity 4 percentage points
Return on equity 14%
Return on assets 12%
Profit margins 11%
Average employee ownership 8%*

NOTES: *After dilution

Total shareholder returns include stock price appreciation and reinvested dividends.

Productivity is defined as output per employee in some studies and as value-added per employee in others.

Return on equity is defined as aftertax profits divided by the outstanding shares.

Return on assets is defined as pretax profits divided by a firm's assets.

Profit margins are income before extraordinary items, taxes, and depreciation, divided by total sales.

SOURCE: Authors' analysis of more than seventy empirical studies.

TABLE 8.1

Corporate America's Top-Heavy Wealth-Sharing

Average ownership stake* of the Corporate America 100 as of December 31,2000, by type of owner

Corporate America

100 %

High Tech 100

%

Top Five Officers
Stock 5 10
Options 3 4
Other executives and managers**
Stock --- ---
Options 6 ---
Total top tier 14 14
Employees***
Stock 2 2
Options **** 17
Total employees 2 19
Total for both groups 16 33

*Total potential ownership, i.e., the percent of all stock and options each group would have owned if all issued options had been exercised.

**Typically less than 5% of the company. Many undoubtedly own stock directly, but the SEC doesn't require companies to report it. Also, the High Tech 100 offer options to everyone and don't break out the holding of this group separately. So their assets are lumped in with those of employees.

***All other employees in the company.

****Less than 1%.

SOURCE: Authors' analysis of SEC filings.

TABLE 9.1

What Employees Could Expect to Earn From Partnership Capitalism

Average profit on 1999 option grants after five years, assuming 10 percent annual stock price increases

Job Salary 1999 Option Grant Profit in 2004* Profit as share of 1999 salary (%)
Hourly $33,000 $9,200 $5,600 16
Non-technical $53,000 $29,300 $17,800 34
Technical $76,000 $48,000 $29,300 38
Sales $92,000 $76,500 $47,600 51
Middle mgr. $83,000 $70,800 $43,300 52
Senior mgr. $134,000 $173,800 $106,100 79
Executives $159,000 $531,000 $324,800 204

NOTES: *Projection based on the assumption that employees exercise all their 1999 options after five years and sell the stock for an immediate cash profit.

SOURCE: Authors' analysis of "Current Practices in Stock Option Plan Design." National Center for Employee Ownership, 2000.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE