1. Stock options are often a part of a senior executive’s compensation, but not a part...

1. Stock options are often a part of a senior executive’s compensation, but not a part of the compensation for a regular worker. Please explain why stock options might not be an attractive incentive for regular workers of a firm.

Solutions

Expert Solution

Stock options are the incentive that brings ownership, rather than the quick cash. So, it is an attractive incentive for the senior executive as a part of their compensation so that they feel motivated when given the ownership in the company. It helps prevent the issues like agency conflict and senior executives give their best performance in decisions and work planning. So, stock option works for the senior executives.

Though, it is not attractive for the regular worker, as they expect to get cash reward that can fulfil their needs of lower level such as physiological needs and safety needs. But, these needs cannot be served by the stock options as it gives wealth in the long term. So, a stock option is not an attractive incentive for the regular workers. Further, regular workers are not in the position to make a strategic decisions, rather they follow the instructions. Hence, stock options are not a good incentive for them, rather it is better to give them a cash reward to regular workers.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Currently, stock options are a major part of most top executive’s pay package. People in favor...

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...

Currently, stock options are a major part of most top executive’s pay package. People in favor...

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. For this discussion you are required to do some independent...

Managerial compensation packages often include stock options with the goal of aligning managers’ incentives with those...

Managerial compensation packages often include stock options with the goal of aligning managers’ incentives with those of the shareholders. These call options give the manager the right, but not the obligation to purchase shares at the strike price on or before a certain maturity date. Discuss two different possible complications that might arise with certain options (think about option’s maturity and the “moneyness” of the option).

Discuss benefits and drawbacks of including non-financial performance criterial in executive’s compensation package.

As part of its stock-based compensation package, on January 1, 2018, International Electronics granted restricted stock...

As part of its stock-based compensation package, on January 1, 2018, International Electronics granted restricted stock units (RSUs) representing 150 million $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equal in value to the market price of those shares at exercise. The RSUs cannot be exercised until the end of 2021 (vesting date) and expire at the end of 2023. The $1 par common shares have a market price of $6...

How is compensation from the exercise of nonstatutory stock options reported to an employee:a) the spread,or...

How is compensation from the exercise of nonstatutory stock options reported to an employee:a) the spread,or difference between the grant price and the fair market value of the stock at the time of exercise is shown in box 14 of the employees form w2:b)the amount of compensation is included in box 1 of the employees form w2 and further identified in box 12 with code v:c) the taxpayer will receive form 3921:d) the taxpayer will receive form 3922

Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for...

Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 20 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date—$10 per share. Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of...

Briefly describe the use of stock options in a compensation plan. What are some potential problems...

Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?

Part 1) In what sense are all healthcare executives’ human resource managers? How can executive’s best...

Part 1) In what sense are all healthcare executives’ human resource managers? How can executive’s best prepare well in this HR function? Part 2) Describe and apply the issues of human resources management and systems development to healthcare professionals.

As part of its stock-based compensation package, on January 1, 2018, Weldon Well Supplies granted restricted...

As part of its stock-based compensation package, on January 1, 2018, Weldon Well Supplies granted restricted stock units (RSUs) representing 100,000 $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equal in value to the market price of those shares at exercise. The RSUs cannot be exercised until the end of 2021 (vesting date) and expire at the end of 2023. The $1 par common shares have a market price of $5.9...

Subjects