Alexei Oulanov, PhD, MBA, MSLIS Medgar Evers College/ City University of New York (USA)

1. the use of the Employers’ stock options as an instrument to influence organizational behaviour: analysis based on academic librarians’ perceptions of the instrument Alexei Oulanov, PhD, MBA, MSLIS Medgar Evers College/ City University of New York (USA) aoulanov@mec.cuny.edu

2. 1 STOCK OPTIONS • A financial incentive that significantly influences organizational behavior is stock options (Macsai, 2007). This financial instrument remains a powerful tool for building employee loyalty despite Enron disaster and the recent significant policy change by the Financial Accounting Standards Board (FASB) requiring its expensing on the company’s income statement (Cortese-Danile, 2013; Spalt, 2013; Dunford, et al., 2008; Marlor, 2007; 401(k) Advisor, 2006). Initially, stock options were used to motivate upper management and key experts, resulting in high-variance bets that brought more losses rather than gains (Sanders & Hambrick, 2007). Albeit, we must admit that managerial opportunism (Isagawa, 2007) might sometimes be beneficial for the company. Subsequently, this financial derivative emanated into the masses and because of that move became very prevalent (Udell, 2008), and possibly more efficient. The power of the affect that stock options have on the employees was also noted abroad, and as a result this powerful tool was adopted in some foreign economies, including Germany and India (Sanders & Tuschke, 2007; Carberry, 2007).

3. 2 SURVEY RESULTS • According to the survey conducted amongst the MEC/CUNY Library faculty and staff 53.9% of the respondents think that it is a good idea to give stock options of the employer to the employees. A qualitative comment indicated that it “motivates the employees to work hard”. (This survey was offered online through SurveyMonkey.com and included 13 respondents. SurveyMonkey served as a kind of randomizing instrument. The survey was absolutely anonymous, and the respondents were the people who volunteered to respond. This survey was piloted with one of the professors at the MEC/CUNY library. The survey can be accessed at http://www.surveymonkey.com/s.aspx?sm=M8icM_2b8ritfSkItk8TirNw_3d_3d.

4. Fig. 1. Descriptive Statistics

5. 2 SURVEY RESULTS • Some 46.2% agreed, 15.4% strongly agreed, 7.7% were undecided, 15.4% disagreed, and 15.4% strongly disagreed that they “would prefer stock options where… [they] could defer paying a tax until… [they] sell the shares. Importantly, in this situation the employer issuing these stock options will not receive any tax deduction”. In other words, they would prefer Incentive Stock Options (ISOs). This is one of the two most significant questions of the survey masked among other less important items. Here we can see that the majority did agree that they would prefer ISOs. However, their convictions on this matter are not as strong as their opinion that ESOs should not be given to the management and the experts only. Here they only “agree”, not “strongly agree”. Furthermore, the percentages of disagreeing and strongly disagreeing are also significant, with some respondents taking a neutral stand. The only one qualitative comment indicates that “it is too complicated to make a decision”. The responses on NSOs are somewhat reciprocal, with 38.5% disagreeing that “deferring paying a tax is less important… than giving the employer an opportunity to have a tax deduction on the unrealized profits”. (This is the second more significant item). The only qualitative comment available here is the same as for the ISO item, verbatim. In the following item 69.2% indicated that they do want more information on the ESOs.

6. Fig. 2a. Correlations

7. Fig.2b. Correlations

8. 3 ANALYSIS • As a part of inferential quantitative assessment, Pearson’s test showed three interesting correlations. The one with the highest significance (p=.007) and pretty high coefficient of .706 is between the preference for ISOs and need to have more information on ESOs. The second one is between the preference for NSOs and degree of familiarity with ESOs (.560; p=.047). The more familiar respondents with the subject, the more likely they are to prefer NSOs, and possibly employer’s interests over their own (in terms of ESOs). The third is a negative one between NSOs and the Age Group (-.612; p=.026). The younger the respondents, the more likely they are to prefer the NSOs. By the way, as mentioned above, “over 55” is the biggest age group, that might be one of the reasons for supporters of ISOs outnumbering the supporters of NSOs. Also, respondents from “over 55” might be more concerned with their retirement situation, and the younger ones with the employer’s future. The regression analyses were also run between demographics as predictor variables and preferences for ISOs or NSOs as dependent variables. The Multiple R=.589 and R Square=.347 for the former, and Multiple R=.781 and R Square=.610 for the latter. That means that 34.7% of variance in the preference of ISOs and 61% of variance in the item on NSOs are accounted for by the Age, Gender, Education, and familiarity with ESOs.

9. Fig. 3. Regression Analysis • Predictors: (Constant), Familiarity, Gender, Age, Education • Dependent Variable: ISOs

10. Fig. 4. ANOVAb • Predictors: (Constant), Familiarity, Gender, Age, Education • Dependent Variable: ISOs

11. Fig. 5. Coefficients a • a. Dependent Variable: ISOs

12. Fig. 6. Residuals Statistics a • a. Dependent Variable: ISOs

13. Fig. 7. Regression Analysis • Predictors: (Constant), Familiarity, Gender, Age, Education • Dependent Variable: NSOs

14. Fig. 8. ANOVAb • a. Dependent Variable: NSOs

15. Fig. 9. Coefficients a • a. Dependent Variable: NSOs

16. Fig. 10. Residuals Statistics a • a. Dependent Variable: NSOs

17. 3 CONCLUSION • The present research triangulated with a variety of quantitative and qualitative components have shown that ESOs are indeed a strong financial incentive that has a potential for significant influence of organizational behavior and builds employee loyalty, especially amongst younger and more financially savvy employees. Another important finding is that while people generally have preference for ISOs, this preference is not absolute and there are lots of folks out there who will put the interests of the employer over their own and will be perfectly motivated by the NSOs. These derivative products can be successfully used in a variety of organizational settings. These settings primarily would include profit-oriented environment. The perspective of the library faculty in the academia maybe similar to the representatives of the same trade in the corporate environment. The views and perceptions of the academic librarians might be relevant when considering the perceptions of the librarians in the corporate libraries and information centers. Additionally, while ESOs currently can be used only in business world, in theory, there might be a possibility of developing a similar equivalent financial instrument that could work as an incentive in the non-for-profit environment.

18. 4 REFERENCES • Berg, B. (1998). Qualitative research methods for the social sciences. Needham Heights, MA: Allyn & Bacon. • Braham, L. (2007). Options: Have an exit plan. Business Week, 82-84. • Carberry, E. J. (2007). Exploring the limits of convergence in the global technology sector: The institutionalization of employee stock option programs in India. Conference Papers -- American Sociological Association. • Cortese-Danile, T. M., Fitzsimons, A., & Latshaw, C. (2013). Stock Option Alternatives. CPA Journal, 83(8), 56-60. • Dunford, B. B., Oler, D. K., & Boudreau, J. W. (2008). Underwater stock options and voluntary executive turnover: A multidisciplinary perspective integrating behavioral and economic theories. Personnel Psychology, 61(4), 687-726. • Isagawa, N. (2007). A theory of unwinding of cross-shareholding under managerial entrenchment. Journal of Financial Research, 30(2), 163-179. • Macsai, D. (2007). Powerful profs. Business Week Online, 27-27.

19. 4 REFERENCES • Marlor, B. G. (2007). It's better to 'cash out' than 'burn out.' Enterprise/Salt Lake City. • Ofdict.com. • Optiontradingpedia.com. • Recent stock-drop litigation: The impact on plan fiduciaries.(2006). 401K Advisor, 13(8), 4-5. • Rogers, C. R. & Farson, R.E. (2007). Active listening. In J. S. Osland, et al. (Ed.), The organizational behavior reader. (8th ed.), (pp. 278-290). Upper Saddle River, NJ: Pearson/Prentice Hall. • Sanders, W. G., & Hambrick, D. C. (2007). Swinging for the fences: The effects of CEO stock options on company risk taking and performance. Academy of Management Journal, 50(5), 1055-1078. • Sanders, W. G., & Tuschke, A. (2007). The adoption of institutionally contested organizational practices: The emergence of stock option pay in Germany. Academy of Management Journal, 50(1), 33-56. • Spalt, O. G. (2013). Probability Weighting and Employee Stock Options. Journal Of Financial & Quantitative Analysis, 48(4), 1085-1118. doi:10.1017/S0022109013000380 • Udell, S. (2008). Understanding stock options. American Journal of Family Law, 22(1), 23-27.