Consequences Of Stock Options

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Stock options are an integral component of many compensation packages, and have the potential to provide advantages to both the granting employer and to the option holder. There are many traps for the unwary which can lead to unintended—and potentially very costly—consequences. To avoid these negative consequences, and to ensure that the intended benefits of the stock options may be realized, employers should review the current procedures implemented for their existing stock option programs and consider the tax issues discussed above prior to implementing new programs or issuing new options. In the event any failures or errors are discovered, employers may be able to mitigate the resulting expense by taking prompt corrective action.…show more content…
For nearly a decade, corporate America has recruited, motivated, and rewarded C-level executives with stock options and stock grants, giving top players an attractive, liquid incentive to achieve short-term stock price gains (Palter, Munk, Leverette, & Monroe, 2006). As the American economy continues to heat up, boards of directors and compensation committees are taking a fresh, hard look at what it takes to retain or attract the best and brightest talent without the use of stock options. The trend has change the dynamics of the companies and corporations. It is necessary to prove the diversity of needs and what employees require to stay on the job and perform to benefit the Organization (Chen & Pelger, 2014).
The compensation has changed drastically and will continue to change in correlation to the cultural change in the market place. Prior research finds that financial analysts often issue biased earnings forecasts to please firm management (Ke & Yu, 2006). Companies started looking hard at who is part of the compensation pool and what type of compensation will be the best to facilitate the retention of the best. The problem companies face is how to keep the best in their mist but at the same time not fall under the same issues that Sarbanes-Oxley try to fight off. The Sarbanes-Oxley challenge has prompted some public companies to all but do away with stock
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