Market-adjusted options for executive compensation Online publication date: Mon, 07-Feb-2005
by James J. Angel, Douglas M. McCabe
Global Business and Economics Review (GBER), Vol. 4, No. 1, 2002
Abstract: Compensation theory implies that managers should not be rewarded or penalised for factors outside their control. However, firms do not adjust the exercise prices of executive stock options to reflect overall stock market movements that are outside the control of the manager. This results in an option much more expensive than necessary to reward a particular level of relative performance. Current accounting rules give firms a strong incentive not to adjust the prices of the options, since to do so would result in a higher reported expense despite the lower economic cost.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the Global Business and Economics Review (GBER):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com