Mixed bag of responses to share option schemes

New
rules governing accounting for employee share options may lead a third of
listed companies to consider abandoning their share options schemes.

This
is one of the key findings to emerge from the second annual survey of employee
share plans among UK companies, conducted by Capita Share Plan Services, Abbey
National and Eversheds. 

The
survey was conducted in November and December last year among 138 quoted
companies, both fully-listed and AIM-listed, together employing more than 1.2
million staff. 

It
shows that awareness of the recommended changes to accounting for share
options, which will require companies to account for their employee share
option awards in their profit and loss accounts, is very high among employers.

Nearly
one-third of respondents say the changes will make it less likely they will
continue to offer share option plans in the future. 

Yet,
the survey suggests this is the only cloud on the horizon of employee share
ownership – despite plunging equity markets, the number of companies offering
employee share plans, and participation rates among employees, remain strong.

Following
a slow start, interest in the new Share Incentive Plan (SIP), introduced as
part of the Chancellor’s drive towards an Enterprise Economy in the Finance Act
2000, has accelerated. 

There
has been a 60 per cent increase in the number of SIPs in place over the last
year. 

Seventy-two
per cent of respondent companies in the FTSE 350 now offer a SIP or are
actively considering implementing one. 

Commenting
on the findings, Justin Cooper, head of share plans at Capita, said:
"Despite extreme market volatility, the employee share ownership ethos
remains strong, with employers remaining enthusiastic about the popular
Sharesave scheme, and interest in the SIP now growing steadily. 

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"However,
concerns over the likely impact of the proposed new accounting standards are
clearly gathering pace, and may well re-shape employee share ownership over the
next few years," he added.

By
Ben Willmott