Lately, stock options have been in the limelight as part of the US government's crack down on accounting fraud. Despite the negative attention options have received, their effectiveness as a recruitment and retention tool cannot be denied. Most recruiters know the role options played as an incentive to lure top talent during the dot-com boom. Today options are still a critical factor in attracting and retaining top talent. In high-growth and emerging industries in particular, options are one of the prime incentives companies can offer workers.

According to The National Center for Employee Ownership, stock options give an employee the right to buy a certain number of shares in the company at a fixed price for a certain number of years. Quantity of options and the timetable under which they can be exercised is usually established as time of hire. Employees with stock options hope the company's share price will increase so that they can exercise their options at a higher market price and make an arbitrage profit. This pattern was especially prevalent in the late 90's, as a fast-rising stock market took equity values through the roof, creating several overnight millionaires.

Today, few employees can bank on the get-rich-quick path that options offered during the dot-com explosion. However, options can still bring great value to the workplace. Options provide employees with a stake in the future growth of the company creating an 'ownership culture.' They are not only a flexible way for firms to share ownership with workers, but also a competitive way to reward performance and attract top talent. Stock options link the fortunes of employees with the company, increasing employee performance and retention.

Once a privilege reserved for top execs, today, several companies spread options across the board, implementing broad-based programs. Still, the ultimate impact of options on recruiting and retention depends a lot on the commitment of the company and its goals for the plan. More than a benefit, a well designed options compensation plan can foster loyalty and motivate employees to contribute extra effort to the company. Some factor to consider when developing an options program include:

• Are options just a benefit or part of an ownership culture?
• How do stock options fit into your current compensation plan?
• Should all employees receive options or only key talent?
• How will the company disseminate program information to employees?
• Is the emphasis on long-term ownership?

Recently, in the wake of corporate accounting scandals, options programs have fallen under increased scrutiny. The Financial Accounting Standards Board is preparing to require corporations to expense stock options, a move that could force companies to eliminate programs. In a study by compensation consultancy Pearl Meyer & Partners, about 40% of companies surveyed recently made significant changes to their option programs. This includes eliminating or reducing the use of options, trimming participation, and general program restructuring.

Companies cutting options plans include high-profile organizations like Microsoft. Microsoft recently discontinued its options program and replaced it with an alternative equity program, giving employees shares in the company. Others remain vociferous advocates of options plans however. Intel's CEO, Craig Barrett Barrett recently criticized the FASB's proposal in The Wall Street Journal, saying that any move to expense options would create a "truly mouth-watering scenario" for class-action lawyers.

With increased government scrutiny, the future of options programs are currently in question. Several companies are changing their tune on options and adopting more conservative compensation programs. However, despite the controversy, options are still an excellent way to incent the majority of employees. As the economy recovers and the current wave of corporate scandals are behind us, companies might change their tune on options. Options may once again rise to popularity again as business refocuses on growth and competition, rather than corruption and reform.