While stock options and attempts to link pay to profitability are universal among executives, some plastics processing firms are trying to bring the same concepts further down into their companies.
About 1,300 of Tredegar Corp.'s 3,500 employees have stock options in the Richmond, Va.-based company. In 2000, that worked out to 105,500 options granted to non-management employees and directors.
That's just a fraction of the 548,510 options the company awarded to senior executives and managers last year, but the employee options go throughout the organization, including clerical employees and hourly-wage machine operators. Executive pay experts say there's a trend toward companies putting options deeper into companies, but it remains relatively rare to do that.
Tredegar spokesman Ed Cunningham said the company does not know how many options a typical hourly employee has but noted that the company has been giving them out for most of its 12-year history. In 1999, for example, the firm gave out 92,400 options to employees and directors, 477,200 to management ranks and 416,000 to senior executives.
``Tredegar has been one of the more active companies in that area,'' said James Aslaksen, managing director at executive recruiter Korn/Ferry International and global leader for their chemical, plastics and metals business. He said such programs could bring large dividends in employee attitude.
``The farther down you push the option issue or the grant issue, the more the company wins from people,'' he said. ``It gives the people in the organization the incentive to perform at a higher level because they are working for themselves.''
But there are risks because it can hurt market capitalization and lower per share value, and it must be carried as earnings, Aslaksen said. It's a good tool if companies have the growth to manage it, he said.
Tredegar, which makes plastic films and other products, has had good growth, with $100 invested in 1995 returning $252 in 2000, although returns dropped in 1999 and 2000. And such a plan may have been easier to set up because the family of Chief Executive Officer John Gottwald controls the company.
Such a program can dilute earnings, as all stock options do, but the benefits outweigh any problems, Cunningham said.
Employee options have easier terms than those for management and senior executive: They vest in a much shorter time, and they are priced at market; while many of the options for executives have an exercise price at least 15 percent above market value.
Other plastics firms, like Spartech Corp., push options down to management ranks; some, like Liqui-Box Corp., mention in their SEC filings that they have formal programs that reward employees with cash bonuses tied to profits, and some let employees purchase discounted shares of stock.
Chicago housewares molder Home Products International Inc. lets nonunion employees buy stock at 85 percent of the market price. About 800 employees out of 1,400 total are eligible. In some years, up to 20 percent of employees have participated, and interest picked up last year when the firm's stock price plummeted, said Chief Financial Officer James Winslow.
Stock dilution has not been a problem, however, because participation has remained relatively low, Winslow said.
Compounder PolyOne Corp. initiated a ``Founders Grant'' employee stock option program last year that gives each employee who works more than 20 hours a week an option on 200 shares. The option vests in three years.
The firm, which formed last year with the merger of Geon Co. and M.A. Hanna Co., wanted to make every employee a shareholder, said Dennis Cocco, chief investor and communications officers.
``Senior executives are granted options for a reason, to perform actions that will enhance the value of the stock,'' Cocco said. ``In a way, this is telling employees that if we do everything we are asked, which is a lot, then we will create shareholder value.''
But the company is not sure if it will continue a Geon program that gave potentially more lucrative stock grants to employees. Geon gave restricted stock grants of up to 3 percent of salary to every employee, based on company performance that year, Cocco said. At this point, that is not being talked about because ``there are just so many things on the table'' with the merger, he said.