Rank-and-File Employees Hit Hardest by Stock Grant Reductions, States New Study by Mellon's Human Resources & Investor Solutions
July 26 2004 - 9:01AM
PR Newswire (US)
Rank-and-File Employees Hit Hardest by Stock Grant Reductions,
States New Study by Mellon's Human Resources & Investor
Solutions - Perceived Lack of Clarity in FASB's Option Expensing
Proposal Causing Confusion - RIDGEFIELD PARK, N.J., July 26
/PRNewswire-FirstCall/ -- A new survey released today by Mellon
Financial Corporation's Human Resources & Investor Solutions
(HR&IS) business reveals that staff employees will feel the
brunt of reductions in stock compensation awards caused by changing
accounting standards. "Responding to Mandatory Option Expensing,"
the third in a series of flash surveys on the topic by HR&IS,
studied more than 100 companies from a broad range of industries
that currently grant stock compensation. The study was completed in
June 2004. "In response to FASB's expensing proposal, the
fundamental finding on equity compensation is one of disparate
impact," said Brett Harsen, a senior consultant in Mellon's
compensation consulting practice. "While stock compensation will
not be abandoned entirely, it will certainly result in greater cuts
for rank-and-file employees than for executives." Seventy-four
percent of survey participants expect to eliminate or reduce stock
grants to non-executive individual contributors while only 21%
expect such cuts for executives, a group that already receives
stock at a higher rate. Compounding this difference, the study
finds that the majority of companies with discounted employee stock
purchase plans (popular programs that provide benefits to all
employees, including lower-paid workers) will be cut back as they
become more costly for employers. On June 30, 2004, the Financial
Accounting Standards Board (FASB) closed the public comment period
on its Share-Based Payment Exposure Document, a draft version of
the proposed accounting changes. Many experts have commented that
the exposure draft isn't clear on how the new rules can be
consistently and accurately implemented. "Our findings support the
growing consensus that FASB's proposal is just not clear enough,"
said Ted Buyniski, a principal in Mellon's compensation consulting
practice who participated in FASB roundtables. Survey findings also
showed that 65% of respondents admit to having insufficient
understanding of the binomial option valuation model (FASB's
preferred method for measuring the cost of options), but perhaps
more importantly, more than 80% say their company auditors haven't
yet provided any guidance on interpreting the exposure draft. "This
clearly shows even the professionals are still digesting the
information," Buyniski said. "We realize FASB is trying to move
toward greater principles-based accounting standards, but the
market needs specific rules on their application so companies'
financial statements remain consistent and comparable." Earlier
this month, HR&IS announced results of its "Equity Practices
Survey for the High Technology Industries." Many of the same trends
found in the high-tech industry study were confirmed in this latest
flash survey of companies in a broad range of industries. Human
Resources & Investor Solutions is the worldwide human resources
and shareholder services business of Mellon Financial Corporation,
a global financial services company. Headquartered in Pittsburgh,
Mellon is one of the world's leading providers of financial
services for institutions, corporations and high net worth
individuals, providing institutional asset management, mutual
funds, private wealth management, asset servicing, human resources
and investor solutions, and treasury services. Mellon has
approximately $3.6 trillion in assets under management,
administration or custody, including more than $675 billion under
management. Its asset management companies include The Dreyfus
Corporation and U.K.-based Newton Investment Management Limited.
News and other information about Mellon is available at
http://www.mellon.com/ . Mellon's survey "Responding to Mandatory
Option Expensing" is available to the media by contacting Ed
Gadowski at (201) 994-2126. It is available to other interested
parties by contacting Brett Harsen at (508) 460-8092 or e-mail at .
DATASOURCE: Mellon Financial Corporation CONTACT: Ed Gadowski,
Corporate Affairs of Mellon Financial Corporation, +1-201-994-2126,
or Web site: http://www.mellon.com/
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