Endless Options

No matter how often the markets let us down, stock options aren't going to die.
Magazine Contributor
2 min read

This story appears in the August 2002 issue of Entrepreneur. Subscribe »

As the economy shakes off the mantle of recession, stock options seem to be still wearing the same tattered duds. But even after the flood of dotcom failures demonstrated how risky options can be, entrepreneurs remain committed to them as a tool for successfully attracting new talent and spurring productivity.

"Stock options will always be part of the start-up culture," says Chris Visser, an attorney with Preston Gates & Ellis in Seattle. "But people have sobered up and stopped seeing them as a sure thing."

That wariness has prompted a shift in compensation strategy for many entrepreneurs. "We're seeing a shift back toward cash and other benefits, such as child-care benefits or flextime," says Neal Weber, a partner at KPMG's McLean, Virginia, office.

While employees still count on stock options as compensation for the compromises of small-business employment, that expectation comes with more intense scrutiny of corporate financial statements and stock performance history. "People want to know what they're getting into," Visser says.

Employees aren't the only ones reevaluating stock options. A proposal in Congress would force companies to treat options as an expense, a prospect that will depress earnings. Most observers say lobbying will almost surely derail the effort.

Despite the past failures and future perils of stock options, companies such as Nanoventions, a micro-optics manufacturer in Roswell, Georgia, continue to use them. Scot Brands, the company's chief financial officer and vice president, says he hasn't noticed any changes in employees' attitudes toward options, which he attributes to the company's market niche. "If you can get people to believe in the product, then they see the tremendous value of stock options," Brands says. Options are especially attractive to Nanoventions employees recruited from academia, where stock options, not to mention company stock in general, don't exist.

Besides, as far as employment goes, Brands adds, "Stock options are the only way to get wealthy."

Contact Sources

More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur

Entrepreneur Media, Inc. values your privacy. In order to understand how people use our site generally, and to create more valuable experiences for you, we may collect data about your use of this site (both directly and through our partners). By continuing to use this site, you are agreeing to the use of that data. For more information on our data policies, please visit our Privacy Policy.