"Although the entire world has felt the impact of the recession, it has not had an equal impact to all. The U.S. does not have the same employment restrictions and rules that the rest of the world has, therefore it took a harder hit on the salary side to control costs," said John Radford, senior vice president, Radford. "Other economies, such as India and China, will continue to grow and invest in their own economies, since stagnation can only serve to set them back further after years of personal, social and business advancement."
Radford data also reveals that the "jobless recovery" continues worldwide, as 58 percent of companies globally indicate hiring levels will remain flat or decrease over the next 12 months, with cautious headcount growth.
Moreover, the need for U.S. technology companies to control cash during the last 12 months has led to material changes in equity strategies and plans, with more technology companies now relying on restricted stock or restricted stock units rather than stock options. Issuing restricted stock alone or in combination with options has become the majority practice at most employee levels in the technology market. Radford found in their recent research that 68 percent of companies were predominantly emphasizing restricted stock in their programs, up 12 percent from last year. In 2008, 59 percent of small and emerging technology companies were option-centric as compared to 47 percent this year, according to Radford's data.
"Historically, we have seen fast-growth companies emphasize stock options to conserve cash and align employees with value created for shareholders; a strong ownership culture has been a core feature of these entrepreneurial companies and cultures to drive innovation," said Linda E. Amuso, president, Radford. "But, we are seeing that small companies have also moved to restricted stock as a key part of their equity strategies in order to compete for talent, improve the retention of these plans, and to 'buy talent out' currently holding restricted shares. It also is a clear indicator that, across the industry, underwater options are pervasive and equity compensation has required a re-examination."
As for cash incentive plans and the probability of payout in 2010 (based on 2009 performance), 35 percent of U.S. technology organizations expect payouts below target for 2009, with 6 percent not expecting any payout at all due to the challenging environment this year.
"As the market continues to pick up and hiring returns, companies will be under pressure to issue merit increases in addition to providing 100 percent funding in their incentive plans in 2010, as a way to reengage employees and to reestablish the variable pay nature of these plans, while still controlling fixed costs and salaries," said Amuso.
