New economy versus old economy firms: the use of stock options and retirement plans for non-executive employees

Abstract

Human resources and financial economics research suggests that a distinguishing feature of new economy firms is their use of stock options to attract, retain, and compensate employees. Previous research has examined the relationship between the granting of stock options and the use of alternate deferred pay mechanisms (defined benefit and defined contribution pension plans) for non-executive employees. This paper brings these research streams together, examining whether the option granting behavior of new and old economy firms is differentially impacted by the use of these other deferred pay plans. Using a large sample of US firms, we find that new economy firms differ significantly from old economy firms in their pay practices and that the relationship between the components of pay differ as well.