Options awarded to women cost companies a little bit more more than those granted to men, according to a new way of determining the value of employee stock options.
Options granted to woman and senior managers are worth more because they hold them for longer, and options that vest annually rather than monthly are worth more for the same reason, according to the research.
The new valuation method combines option theory with observations of what employees do with their grants.
Because men tend to execute their stock options faster than women, options awarded to women cost companies 2 to 4 percent more. Awards to most senior employees cost companies 2 to 7 percent more, because they also tend to keep their stock options for longer. Shifting to a monthly vesting date for options can reduce their value by as much as 16 percent because that lets people exercise the options sooner and more often.
To come to these conclusions, the researchers analyzed data that included complete employee stock option histories for 290,000 employees from 1981 to 2009 at 88 publicly traded companies.
The attempt at figuring out what stock options actually costs companies is explained in “Employee Stock Option Exercise and Firm Cost,” to be published in the Journal of Finance. It’s co-authored by University of California Berkeley Professor Nancy Wallace and New York University Associate Professor Jennifer N. Carpenter.