Monday, March 14, 2005

Cutting Benefits

Last week I had three days off work, so I came into work today decidedly non-bitter. That lasted all of half-a-day, until they sent out an e-mail saying that the Employee Stock Purchase Plan was being discontinued.

I always thought the ESPP was one of our better benefits, as it was effectively free money. The plan was pretty standard, letting you buy stock at a 15% discount of the lowest price at either the beginning or the end of the quarter. So you were nearly guaranteed a 15% return on your money, and a better return if the stock actually went up. I figured out that over the time I have been with the company the ESPP averaged out to be worth about $1,100 a year.

It seems to me that for the company having the stock purchase plan was a good thing because it helps drive stock ownership in their employees. That gives the employees a vested interest in the stock price and overall company performance. And given that the stock was purchased from escrowed shares specifically designated as being for the plan years in advance, it is debatable how much offering the plan really 'cost' the company.

The company e-mail tried to use shifty wording to make it sound like the new accounting rules on stock purchase plans and stock options would mean offering the plan would suddenly start costing the company money. Except that isn't the case, what is actually happening is that they have to start considering the cost of the plan as an expense.

Now I don't have any issue with the new accounting rules, after all it certainly costs the company something to offer a plan and/or stock options. I just have an issue with using the change in how things are entered in the books as an excuse to cut benefits.

No word on whether the company is discontinuing gifts of stock options to the executives since stock options now have to be treated as expenses as well. I'm not holding my breath.

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