The design of executive stock options
Article Abstract:
The impact of executive stock options on shareholder welfare was investigated within the framework of a static principal-agent model. There is an increasing trend to use stock options due to the incentives they provide and tax benefits. An executive compensation package which provides salary in addition to options will result in less risks to an executive's income but will result in lesser incentives. Increasing, however, an executive's salary and stock exercise price will not improve risk sharing efforts and result in lesser shareholder welfare.
Publication Name: Managerial & Decision Economics
Subject: Economics
ISSN: 0143-6570
Year: 1995
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A classroom exercise on executive incentive compensation schemes
Article Abstract:
A simple game-theoretic exercise for designing an incentive scheme has been developed to help students gain a greater understanding on the factors and mechanisms involved in developing executive incentive compensation schemes. The model was examined with the assumption that the value of the company is observable. Three incentive compensation schemes were examined: cash bonus, options and a combination of both.
Publication Name: Managerial & Decision Economics
Subject: Economics
ISSN: 0143-6570
Year: 1995
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Product-market competition and executive compensation
Article Abstract:
The compensation scheme is one of the most significant factors which motivate managers. The effect of product-market competition on the composition of executive compensation is analyzed. The incentive component of executive compensation increased in a competitive product market based on theoretical and empirical models.
Publication Name: Journal of Economics and Business
Subject: Economics
ISSN: 0148-6195
Year: 1995
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