What kind of option can be used to incentive CEOs? Discuss the difference between stock option compensation and stock compensation.
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What kind of option can be used to incentive CEOs? Discuss the difference between stock option compensation and stock compensation.
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- How is it possible for an employee stock option to be valuable even if the firms stock price fails to meet shareholders expectations?Explain how a firm might use stock options in order to incentivise a manager to work in the shareholders’ best interests.How is it possible for an employee stock option to be valuable even if the firm’s stock price fails to meet shareholder’s expectations?
- Why are stock options a controversial employee benefit, particularly for top executives?“Stock options are generally a more appropriate form of compensation for lower-level managers than for higher-level managers.” Do you agree with this statement?The rationale behind granting stock options is toinduce employees to work harder and be moreproductive. As the stock price increases (presumably due to their hard work), the employees sharein this added wealth. Another way to share thiswealth would be to grant shares of stock ratherthan options. What are the advantages anddisadvantages of using stock options rather thanshares of stock as employee incentives?
- Which of the following describes preferred stock? a. Stock that sells for a very high price b. Stock that is sold to employees of the company as a performance incentive c. Stock which gives shareholders certain preferences and advantages over common stock d. Stock that is purchased by the corporation for investment purposesExplain how “at-the-money” stock options (i.e., options that have no intrinsic value) which are part of an executive compensation package results in compensation expense.With respect to the shareholder/manager relationship, which of the following statements is FALSE? a. The managerial salary package should include an incentive component b. Executive stock options do not have expiration dates and are held in perpetuity c. Executive stock options tend to be issued out-of-money d. Performance shares can be used to align manager/shareholder interests
- What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?Historically, technology firms have been the most aggressive users of stock-based compensation in the form of stock options granted to almost all employees of the firms. What is the rational for offering stock options and compensation? Why has this form of compensation been particularly popular with technology firms in the past?
