Stock options plans: Solving agency issues

Author:

Silva João,Feiteiro André

Abstract

Internal decision-making processes of companies are not a truly homogeneous process taking into consideration all parties to a company. On the contrary, it is a reflex of the intention of an entitled few that finds legitimacy in corporate structure. An efficient alignment of interests of all parties is crucial and attainable through remuneration policies, and specifically, through variable and performance-driven compensation. After all, these interests are essentially economic interests. In this paper, the focus is stock options plans as a solution to agency issues. Because options stimulate the acquisition of shares of the company, management tends to have more skin on the game, discouraging excessive risk taking but also entailing long-term commitment with the company. We believe that the best solutions for most companies are not necessarily the best solution for all of them. For that matter, a number of similar instruments are reviewed as well as different categories of stock options. We conclude that corporate governance mechanisms can be adapted to mitigate stock options plans’ weaknesses. Solutions may be, for example, balanced strike prices – with great caution in the cases of premium options and performance-vested options and equal caution when using indexes as assessment parameters of the management’s performance. The fact that solutions are found in corporate governance to solve issues within stock options plans, leads to the conclusion that criticism regards the design of stock options plan and not stock options plans themselves.

Publisher

Virtus Interpress

Subject

General Medicine

Reference40 articles.

1. Aboody, D., & Lev, B. (2000). Information asymmetry, R&D, and insider gains. The Journal of Finance, 55(6), 2747-2766. https://doi.org/10.1111/0022-1082.00305

2. Alchian, A. A., & Demsetz, H. (1972). Production, information costs and economic organization. The American Economic Review, 62(5), 777-795.

3. Antunes, J. E. (2017). Os Instrumentos Financeiros. Lisbon: Almedina.

4. Araújo, F. (2005). Introdução à Economia. Lisbon: Almedina.

5. Balsam, S. (2002). An introduction to executive compensation. Elsevier.

Cited by 1 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. How COVID-19 reshapes businesses and executive pay for sustainability;Corporate Governance and Sustainability Review;2021

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3