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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/