An ambitious stock option program, approved only 11 months ago by the board of Norwest Corp. as an incentive for front-line employees, appears about to be triggered years ahead of schedule.
The program, dubbed "Best Practices Partner Shares," has created a heady sense of anticipation among some of the company's 40,000-plus workers. They could get a tidy bonus of nearly $2,700 each in options when Norwest shares close above $60 for the first time.
The prospect has caused some headaches for the Minneapolis-based holding company's human resources staff, which had to scramble to get the plan up and running much earlier than expected because of the surge in Norwest's stock price.
When Partner Shares was launched last July, the share price was $33.125. Since then it has soared nearly 80% and is now hovering near the trigger price, closing at $59 one day last week, but down to $57.375 Wednesday.
"We really thought it was going to take two to three years to reach $60," said Paula Roe, the senior vice president in charge of installing the program. "I didn't think we'd be crossing the t's and dotting the i's this soon."
Ben Crabtree, an analyst at Dain Bosworth Inc. in Minneapolis, said the price gains are less a testament to the company's performance than to the general giddiness of the market.
"Regional banks are still trading at 70% of the P/E ratio of the (Standard & Poor's) 500," he said. "Norwest is trading in the upper part of the range of companies I follow, but its stock hasn't dramatically outperformed other banks."
The stock option program was the brainchild of chief executive officer Richard M. Kovacevich, who decided last June that he wanted to provide greater incentives for nonexecutive employees to focus on adding shareholder value.
Within a month, Partner Shares was born, modeled in part on option programs at Chase Manhattan Corp., NationsBank Corp., and BankAmerica Corp.
When Norwest's price closes above $60, it will allow each full-time employee to purchase 100 shares at the July 23, 1996, closing price of $33.125. Part-timers can buy 50 shares.
In recent months, 25 human resources staff members have worked almost exclusively on building infrastructure to handle the expected purchase of about 4 million shares by employees.
"The biggest challenge is how to process exercises for 40,000 employees around the world," Ms. Roe said.
A special voice-response unit, accessible via a toll-free telephone number, has been created to expedite share purchases, and a separate customer service line has been set up for questions.
In-house awareness of the potential payoff is high. A video featuring Mr. Kovacevich was sent to all Norwest offices detailing the program. The main employee publication, Norwest World, has run a story with updates in each issue. And last month, employees received a prospectus to help guide their decisions.
The coordinated package has created a buzz in lunchrooms, on teller lines and in office cubicles across an enterprise in which some 75% of employees already own stock.
"Everybody's talking about whether they're going to execute their options or hang on to them," said one employee in the check clearing department.
Like many workers, the employee said her biggest hurdle was coming up with the $3,312.50 needed to execute the options. She plans to borrow from relatives to make the purchase, sell the shares to pay the loan off, and use the rest to finance some home improvements.
Mr. Crabtree said the value of such programs cannot be understated. "It has a very positive effect in making people think less like employees, and more like owners," he said.
The issuance of 4 million shares of Norwest stock is a pittance compared with the 369 million common shares outstanding at the close of 1996. "Whatever dilution there is can be easily made up for in the open market," Mr. Crabtree said.
A Norwest spokesman said average annual starting pay for tellers is about $15,000, making the options equivalent to an 18% bonus.
Ms. Roe said such numbers "have heightened the awareness (of share prices) of virtually every Norwest employee and promoted the idea that there's a strong correlation between the value of Norwest stock and employee performance."