Stock-options plans : «From bonus granted to high management to financing source for small and medium-size companies»

More and more managers of small and medium-size companies decide to refinance their companies through the granting of stock options to their employees. This financing source enables companies to limit their banking credit and to share their capital with their employees.

During a long time the stock options plans, the emission of warrants or simple calls on shares were exclusively reserved to managers of big multinational companies. This phenomenon was at its top at the end of the 90s and personalized in the person of Jean-Marie Messier who granted himself small payments but bought himself yachts and luxury hotels on fifth avenue thanks to his famous stock-options Vivendi.

With the economic crisis, the practice of stock-options granted to managers of big multinational companies became more discreet. The mechanism of stock-options did certainly not disappear but was transformed.

For reminder, the granting of stock-options by a company to its employees or managers (or to the management companies of these) is considered to be a remuneration but the taxation of stock-options is extremely favorable: by respecting the required fiscal conditions it is possible to decrease the taxation of 3% or 4% of the market value of the shares at the time of constitution of the options (application of a taxable base of 7,5 % of the value of the underlying).

As a result of this attractive taxation, we observe that more and more creative entrepreneurs decide to re-finance their company via the granting of stock options to their staff. This financing source enables companies to limit the banking credit and to share their capital with employees.

This phenomenon allows us to notice that the economic and financial crisis auto-generated the transformation of a symbolic element of capitalism in a participative model for the workers.