Tthe use of share options
Enthusiasts have long argued that share option schemes provide management with a powerful motivation tool. Stock ownership aligns employee and shareholder interests will strengthening employee levels of commitment. In an increasingly competitive business environment, options are a way to attract and motivate key employees such as managing director or Chief executive officer (COE). In critically evaluate the use of share option to align managers and shareholders interests, this essay firstly describe how share option scheme work for basic understanding. Secondly the process how share option aligns managers and shareholders interest is discussed in relation to agency theory which suggests that there always conflict of interests between managers and shareholders. Illustration of real example from certain company case such as Forest Laboratory and Oracle gives contrast of whether share option as remuneration packages for managers aligns managers-shareholders interests. Finally, possible related problems of share option as compensation package in relation to align managers-shareholders interests are evaluated. Suggestions on how share option should be treated to align managers-shareholders interests are discussed, and illus
25 cents, in New York Stock Exchange composite trading. All in favor say aye!" (Geoffrey, 1992, p. ConclusionIt is accepted that properly constructed share option schemes do appear to motivate and drive recipients to increase shareholder wealth over the medium and longer term. These are options to buy and sell shares. Within a month, Oracle stock had lost a third of its value and the company was announcing that it would miss third quarter forecasts (Wall street journal, 2001, p. If the stock rises, terrific; if it falls, they simply discard the worthless things. This essay firstly discusses the notion of share option, explain how share options align manager and shareholders interest, and finally confer possible problems with share options. The core principle of paying the chief is aligning his interests with the shareholders'. Above evidence proofs share option as monetary incentive increased manager effort, and this effort increased performance on the recall tasks of increasing company's market share value. Managed earnings, manipulated dividend policy, debt funded share buy-backs, re-priced options and the excessive use of re-engineering to cut costs and so boost the share price, are amongst the more commonly used tools to distort performance in the short term often at the cost of a material reduction in medium and longer terms capability (Goddard, 2001, p. The reason is simple, the executive will work and put all effort to maximize his wealth by raising the stock price, and shareholders get the benefit. The asset involved in an option could be anything. From this view, adapting another piece of economic theory, that agency theory suggests that individuals will react strongly and rapidly to any significant monetary stimulus and seek always to optimize their position. In late September, Cendant announced to reprice options for its 45 most senior executives, after an accounting scandal slashed the company's stock price to about $13.
Common topics in this essay:
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Synopsis Enthusiasts,
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Introduction Enthusiasts,
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business environment options,
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Acceptance Essays
