Question

Currently, stock options are a major part of most top executive’s pay package. People in favor consider stock options an excellent incentive; after all, the executive is rewarded only if the value of the corporation’s stock goes up. Detractors see stock options as a bad deal; after all, the executive gets rewarded if the stock goes up for whatever reason, even if that reason is completely unrelated to his/her performance.

1. As a shareholder, how do you feel about making stock options a significant part of top management’s compensation? Why?

2. As a top manager, how do you feel about stock options being offered as a significant part of your compensation? Why?

3. As a shareholder, how do you feel about the fact that top managers’ compensation is significantly offered in stock options, but not that of other employees? Why?

4. As an entry-level or mid-management employee, how would you feel if a part of your compensation were offered in stock options? Why?

Answer 1

1.As a shareholder, making stocks an important part of top management compensation is felt right to me, as because of this, company's main motive will be to increase the value the stocks. And increasing value of stocks will result in increasing the value of shareholders.

Therefore, as a shareholder, this stock being a major part of the top management compensation is felt very advantageous for shareholders..

2. As a top manager, it is not so good to offer stock options as important part of compensation, as this would increase the value of shareholders resulting to increase in the amount being paid to them which would increase the cost to company, but as that would be the offer, one cannot escape from the consequences. And every top management would want compensation so they would try increase the shareholder's value.

3. Only the top Management's compensation is offered on basis of stock offer and not for other employees. This is such because it is the top management who takes initiatives for what should be dime in an organisation. Now, the decision to increase the shareholder's value is also dependent on them. Therefore, it can be said that the top manament is given some advantages so that they would be planking fir in reading shareholders wealth and value which is profitable for the organization. Other employees do not take such decisions therefore, their compensation is not affected by this.

4. As a entry level or mid management employee, if a part of my compensation is offered in stock options, then there will be positive response as this would ultimately be leading to a situation where value of shareholders will increase and thus this will increase the company's value which wilm in turn increase value of all employee working and benefit all of them.