Compensation Management: Stock Plans, Retention, and Starbucks

This essay provides an overview of stock plans and their role in compensation management, focusing on how these plans contribute to employee retention. It discusses different types of stock plans, including stock bonus plans, share purchase plans, and stock option plans, outlining the characteristics of each. Furthermore, the essay highlights the advantages and disadvantages of stock plans, such as increased employee knowledge and alignment of goals versus potential risks and administrative burdens. The case of Starbucks is mentioned as a practical example. This student-contributed assignment is available on Desklib, where students can find a wealth of academic resources.

Running head: COMPENSATION MANAGEMENT
Compensation Management
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
1. Introduction:............................................................................................................................................2
1.1 Introduction to the paper:...................................................................................................................2
1.2 Stock plans:.......................................................................................................................................2
1.3 Retention:..........................................................................................................................................2
2. Conclusion:..............................................................................................................................................2
2.1 Types of stock plans:.........................................................................................................................2
2.2 Pros and cons of stock plans:.............................................................................................................3
References:..................................................................................................................................................4

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1. Introduction:
1.1 Introduction to the paper:
The current paper aims to discuss the stock plans and the types of stocks that an organization uses
for its equity shareholders. In addition, it would highlight how the stock plans help the organizations to
retain their key staffs. Finally, the pros and cons of the types of stocks of Starbucks are discussed briefly
in this paper.
1.2 Stock plans:
Stock plans are the programs that an organization carries out where the participating staffs could
buy its shares at a discounted price. The staffs contribute to these plans with the help of payroll
deductions, which is developed between the date of purchase and the offering date (Ahmad, 2015). At the
date of purchase, the organization utilizes the accumulated funds for buying shares in the organization on
behalf of the staffs. The rate of discount on company shares relies on the particular plan; however, it
could be a maximum of 15% lower in contrast to the market price.
1.3 Retention:
As stock plans are a type of deferred compensation strategy on the part of an organization, the
benefits are passed over to the employees and thus, they increase their overall wealth creation. In case, the
employees feel that they own a stake in the organization, they would make all the efforts for counting
towards the same (Honack & Waikar, 2017). Hence, stock plans serve as an effective tool of retention,
since the employees could be linked directly with the growth or decline of the organizations.

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2. Conclusion:
2.1 Types of stock plans:
There are mainly three types of stock plans in an organization, which comprise of stock bonus
plans, share purchase plans and stock option plans. Stock bonus plans are those shares that are provided to
the employees at free of cost like in case of retirement plans and investment accounts. Share purchase
plans are those at the time employees directly pay to the organizations in which they work for taking
company shares (Jones, Forsythe & Kemp, 2015). Stock option plans are those in which the employees
are given with options to buy company shares at a future date at a certain price, which would be exercised
with the rising market price. However, these plans are provided to some specific employees of the
organizations.
2.2 Pros and cons of stock plans:
The pros of the above-stated stock plans are depicted briefly as follows:
 The employees have adequate knowledge of their organizations before making investment
decisions
 Security is ensured in these types of stock plans, since the employees would retain them even
after retirement or termination (White, 2016).
 With the help of these stock plans, both the organizational goals and employee goals could be
lined up.
However, there are certain cons related to these plans and they are enumerated as follows:
 As the employees are left with shares only, it could increase their overall risk on savings.
 The employees need to be aware about the professional fees related to tax and administration
issues.
 Since the employees could not exercise any kind of effect on the stock option, it could result in
poor performance and thus, they might lose interest in the plans.

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References:
Ahmad, A. (2015). Executive Stock Option Contract Increases Firm Value and Performance: A Case
Study on Starbucks Company. Global Journal of Management And Business Research.
Honack, R., & Waikar, S. (2017). Growing Big While Staying Small: Starbucks Harvests International
Growth. Kellogg School of Management Cases, 1-22.
Jones, I. M., Forsythe, L. M., & Kemp, D. J. (2015). Dumb Starbucks: Parody or Clever Marketing Ploy?
A Teaching Case. Journal of the International Academy for Case Studies, 21(6), 337.
White, S. (2016). Starbucks. Journal of Financial Education, 42(3-4), 359-379.