Pittsburgh-based Mellon Bank Corp. has joined a growing list of the nation's largest banking companies that offer stock options to rank-and- file employees.
The program, which grants options to all of Mellon's full-time workers and most of its part-time staff, is part of a six-month-old plan to make Mellon the "employer of choice," said chairman and chief executive officer Martin G. McGuinn.
Acknowledging that the nation's strong economy has tightened the labor market, Mr. McGuinn said in an interview Monday that the $49 billion-asset company wants to attract and retain the best talent.
It has been a challenge to meet the goal otherwise, he admitted.
Stock-option plans are gaining in popularity among big banking companies. Bank of America Corp., Chase Manhattan Corp., Citigroup, and Wells Fargo & Co., have all announced similar plans in recent years.
Mellon refused to say how much its plan would cost. But Denis LaPlante, a bank analyst with Fox-Pitt, Kelton Inc., New York, estimated that Mellon would spend $20 million per year, from 2000 to 2003, to pay for the program.
The plan covers 22,000 of the company's 26,500 employees. Those excluded are 2,000 managers who already receive options and 2,500 part-timers ineligible for benefits.
Dubbed ShareSuccess and announced Monday, the plan is designed to make Mellon's employees feel appreciated and give them a sense of ownership in the company, Mr. McGuinn said.
In return, Mellon hopes, its staff will serve customers better.
"Each employee plays into the success of the company," said Mr. McGuinn. "This aligns their interests with that of shareholders."
All full-time employees who are not currently part of an executive stock-option plan would each receive options to buy 150 shares per year for three years.
Part-timers who qualify for health care and retirement benefits would receive options for 75 shares per year. All of the options are vested for one year and may be exercised at a strike price of $33.625 once Mellon's stock price reaches or exceeds the target share price of $45 for 10 consecutive business days.
Mellon's shares closed Monday's trading at $35.125, up 37.5 cents.
Across all industries, the percentage of companies offering stock options to lower-level employees has more than doubled since 1993, to 39.4%, according to a recent survey by human resources consulting firm William M. Mercer Inc., New York
"The more forward-thinking companies are either considering this or implementing it," said Charles B. Wendel, president of Financial Institutions Consulting. "You want to create a sense of esprit at a corporation-a sense of being special."
In Mellon's case, the stock-option plan may provide some stability since the company long has been rumored as an acquisition candidate, Mr. Wendel said.
"The willingness to go somewhere else may be stronger at Mellon," he said.
"This gives people another reason for staying."
Analysts also applauded the move.
Mr. LaPlante said stock options are a relatively cheap way for banks to show employees that they are valued while boosting productivity.
"We like employees who are owners," he said. "You want people to focus on making things work, clicking with customers," he added.