Download or read book Altering the Terms of Executive Stock Options written by Menachem Brenner and published by . This book was released on 1998 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Altering the Terms of Executive Stock Options written by Menachem Brenner and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the practice of resetting of the terms of previously-issued executive stock options. We identify the properties of the typical reset option, characterize the firms that have reset options, and develop a model to value options that may be reset. In our sample of 396 executives whose options had terms reset in the 1992-95 period, a large majority ad exercise prices reset to the market price. This resulted in a reduction of the typical option's exercise price by about 40%. Slightly less than half of these options also had their maturities extended, generally receiving a new expiration of 10 years.We find that resetting has a strong negative relationship with firm performance even after correcting for industry performance. Resetting is also significantly more common among small firms than among large firms. However, few other industry- or firm-specific factors appear to matter. Finally, we find that the possibility of resetting does not have a large impact on the ex-ante value of an option award, but the ex-post gain can be substantial.
Download or read book Executive Stock Options written by United States. Congress. Senate. Committee on Homeland Security and Governmental Affairs. Permanent Subcommittee on Investigations and published by . This book was released on 2007 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stock Options and the New Rules of Corporate Accountability written by Donald P. Delves and published by McGraw Hill Professional. This book was released on 2003-09-22 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: "As a former CEO and independent director of several corporations, I find Don Delves' discussion of executive compensation -- including detailed and insightful reviews of the issues involving stock options -- to be exceedingly instructive. This is a book that members of compensation committees, indeed all corporate board members should read." -B. Kenneth West, Former CEO, Harris Trust and Savings Bank and member of several corporate boards. Guidelines for curbing today's stock option abuses, and making "payment for performance" the new imperative Stock options account for up to 90 percent of the average CEO's compensation--despite a falling stock market and often plunging corporate earnings. Stock Options and the New Rules of Corporate Accountability examines this hot-button issue, proposing new methodologies and techniques for better aligning stock options, executive compensation, performance rewards, and accounting, and making sense of what has become today's most controversial form of compensation. Executive compensation authority Don Delves explains how high-profile corporations like GE and Coca-Cola have opted to expense stock options and have adjusted their policies to prevent options from becoming disincentive tools, and he shows others how to follow suit. In addition, Delves gives decision makers the knowledge they need to: Increase accountability by treating stock options as expenses Balance options with other incentives Create healthier contracts between employers and employees
Download or read book The Valuation of Executive Stock Options when Executives Can Influence the Payoffs written by Tung-Hsiao Yang and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is widely believed that because of liquidity constraints and vesting requirements, executives value stock options at less than market or Black-Scholes-Merton values, as would be perceived by outside investors. This belief is contingent, however, on a subtle assumption that executives are, like shareholders, price takers with no ability to influence the underlying stock. But executives clearly have the ability to influence the stock, as that is the principal reason why they are granted the options. As such, executives are likely to be more willing to hold options than would ordinary investors, an important fact not captured in conventional models. We develop a model in which executives exert costly effort to alter the stock return distribution. We find that when executives act optimally, their options are worth much more than generally believed and potentially more than the market values of the options. Thus, conventional wisdom that the cost of stock options is less than the market value of these options is not necessarily true as these options can even be worth more than Black-Scholes-Merton value. In addition, this factor changes the behavior of early exercise, leading to exercise at higher threshold prices for higher quality executives and can make shorter term options be worth more than longer term options.
Download or read book Executive Stock Options and Stock Appreciation Rights written by Herbert Kraus and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Don't even consider preparing a stock option plan for your company or clients without this unique one-volume reference book. Executive Stock Options and Stock Appreciation Rights will guide you through such vital topics as: types of stock options available, including nonqualified and incentive stock options; stock appreciation rights; SEC disclosure and registration requirements; liabilities under Section 16(b) and Rule 16b-3; stock option repricing; Section 423 stock purchase plans; federal tax law including Section 409A; state corporation and blue sky laws; accounting practice under revised Statement of Financial Accounting Standards No. 123; timing of stock option grants; requirements of the stock exchanges; IRS rulings affecting gifts of compensatory stock options; self-repricing "look-back" options; federal tax implications of dividing employee stock options in marital property settlements; and granting of stock options to dual or "leased" employees. You'll learn about the advantages and disadvantages for both the company and the optionee. Plus, you'll find numerous sample forms and documents, including stock option plans for public and closely held companies, proxy statements, and submissions to stockholders disclosing existing stock option arrangements.
Download or read book The Pay to Performance Incentives of Executive Stock Options written by Brian J. Hall and published by . This book was released on 1998 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Detailed data about stock option contracts are used to measure and analyze the pay to performance incentives of executive stock options. Two main issues are addressed. The first is the pay to performance incentives created by the revaluation of stock option holdings. The findings suggest that if CEO stock holdings were replaced by the same ex ante value of stock options, the pay to performance sensitivity of the median CEO would approximately double. Relative to granting at the money options, a value neutral policy of regularly granting options out of the money (Pe=1.5P) would increase pay to performance sensitivity by approximately 27 percent. The second issue is the pay to performance created by yearly stock option grants. Because most stock option plans are multi year plans, it is shown that different option granting plans have significantly different pay to performance incentives since changes in current stock prices affect the value of future option grants in different ways. Four option granting policies are compared and contrasted. Ranked from highest powered to lowest powered, these policies are: 1) LBO-style up-front options, 2) fixed number policies, 3) fixed value policies and 4) an (unofficial) policy of "back-door repricing." Empirical evidence suggests that (even ignoring the revaluation of past option grants) the pay to performance relationship in practice is stronger for 1) stock option grants relative to salary and bonus, and 2) fixed number plans relative to non-fixed number plans.
Download or read book Incentive Stock Option Plans written by Harland Fox and published by . This book was released on 1983 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book On Rescissions in Executive Stock Options written by Menachem Brenner and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study executive stock options that permit the option holder to rescind an exercise decision, returning the shares acquired to the company and obtaining a refund of the exercise price. Rescissions occurred at a number of U.S. companies in 2000 after the large decline in internet stocks, and have been widely condemned as a weakening of incentives. To the contrary, we find that in many situations rescindable options dominate ordinary options by delivering greater value and stronger incentives to the employee at a lower cost to the firm. The attractiveness of rescinable options arises as a consequence of the income tax treatment of most executive stock options in the U.S.
Download or read book The Valuation of Executive Stock Options that Incorporate Reset Provisions written by John Joseph Stansfield and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Contract Renegotiation and the Optimality of Resetting Executive Stock Options written by Viral V. Acharya and published by . This book was released on 2008 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical work has documented the tendency of corporations to reset strike prices on previously-awarded executive stock option grants when declining stock prices have pushed these options out-of-the-money. This practice has been criticized as counter-productive since it weakens incentives present in the original award.
Download or read book Strategic Timing and Backdating of Executive Stock Option Exercises written by David C. Cicero and published by . This book was released on 2007 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers executive stock option exercise timing in light of the potential for backdating of exercise dates. I find that 29 (16) percent of executive option exercises were not associated with same-day disposition of shares before (after) the August 29, 2002, enactment of more restrictive SEC reporting requirements for insider transactions under the Sarbanes-Oxley Act. I interpret this as evidence executives often exercise options with the intention of holding the acquired shares for at least a year in order to qualify for long-term capital gains tax treatment on stock appreciation beyond the exercise date. Exercises accompanied by stock disposition are associated with a stock return peak, and exercises not accompanied by stock disposition are associated with a stock return trough. Further tests indicate that in the pre-Sarbanes-Oxley period executives timed exercises ex ante based on private information regardless of the stock disposition strategy, and they often backdated exercise dates when they held the acquired shares or disposed of shares back to the company only. In the post-Sarbanes-Oxley period, executives appear to have benefited through ex ante information timing only.
Download or read book Executive Stock Options Firm Performance and Risk written by Allan McCall and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation comprises two essays on the use of stock options as compensation. In the first I examine the implementation of stock option plans in the 1950s as a natural experiment through which to examine the incentive implications of stock options. In the 1950 Revenue Act, Congress created "restricted stock options" that received favorable tax treatment compared to other forms of compensation. Immediately prior to change in tax law, there was almost no use of stock options for compensation. Over subsequent years, the majority of firms in my sample implement stock option plans. I find evidence that executives appear to respond to stock option plans by increasing firm risk and decreasing dividend payments. However, I do not find that firms implementing stock option plans subsequently perform better, and in fact find that in terms of ROA, they perform worse over the two years after putting a stock option plan in place. The second essay examines the economic consequences associated with the board of director choice of whether to adhere to proxy advisory firm policies in the design of stock option repricing programs. Proxy advisors provide research and voting recommendations to institutional investors on issues subject to a shareholder vote. Since many institutional investors follow the recommendations of proxy advisors in their voting, proxy advisor policies are an important consideration for corporate boards in the development of programs that require shareholder approval such as stock option repricing programs. Using a comprehensive sample of stock option repricings announced between 2004 and 2009, we find that repricing firms following the restrictive policies of proxy advisors exhibit statistically lower market reaction to the repricing, lower operating performance, and higher employee turnover. These results are consistent with the conclusion that proxy advisory firm recommendations regarding stock option repricings are not value increasing for shareholders.
Download or read book An Executive s Guide Incentive and Nonqualified Stock Options written by Family Office Publishing and published by . This book was released on 2002-03 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive, easy reading treatment to the complex area of stock options. In a question/answer formt, covers a variety of topics including: stock options in divorce; exercising stock options; gifting and estate planning with stock options; taxes on incentive and nonqualified stock options; employee stock purchase plans; underwater stock options.
Download or read book On the Optimality of Resetting Executive Stock Options written by Viral V. Acharya and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical work has documented the tendency of corporations to reset strike prices on previously-awarded executive stock option grants when declining stock prices have pushed these options out-of-the-money. This practice has been criticised as counter-productive since it weakens incentives present in the original award. This paper presents a theoretical analysis of the optimality of resetting executive stock options based on a dynamic agency framework. The firm's shareholders (the quot;principalquot;) provide an effort-averse manager (the quot;agentquot;) with long-term incentives in the form of call options on the firm's equity. Given an initial compensation contract for the manager, suppose interim information becomes available on the state of the world. From the standpoint of ex-ante value maximization, can it be optimal for the principal to agree to amend the terms of the original option award to reflect this additional information? We show that although the anticipation of resetting can have a substantial negative effect on initial incentives, resetting provides superior incentives for continuation. Resetting can thus be an important, value-enhancing aspect of corporate compensation contracts, even from an ex-ante standpoint. We find in a precise sense that some resetting is almost always ex-ante optimal. By allowing dependence on interim information, resetting allows the manager's final payoffs to incorporate a greater degree of sensitivity to the realized path; this flexibility is lost if the principal commits not to reset the contract. We also characterize the conditions that affect the relative optimality of resetting. We find, for example, that resetting becomes relatively less optimal (i) as managerial ability to manipulate contractual resetting increases; (ii) as direct or indirect costs of replacing the incumbent manager decrease; and (iii) as external (economy- or industry-wide) factors increase in importance relative to managerial input in return generation. The last feature offers one possible explanation for why resetting has been far more common in small firms than large ones. We find that our results are robust to expanding the menu of compensation contracts to allow for equity, cash, bonuses, etc. In summary, our results suggest that much of the criticism of the practice of resetting may be misguided.
Download or read book Executive Stock Options written by Neil Brisley and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional executive stock option plans allow fixed numbers of options to vest periodically, independent of stock price performance. Because such options may climb deep in-the-money long before the manager can exercise them, they can exacerbate risk aversion in project selection. Making the proportion of options that vest a gradually increasing function of the stock price can ensure that appropriate numbers of options are retained while they provide risk-taking incentives, but are exercised once they have lost their convexity. Progressive performance vesting can allow the firm more efficiently to rebalance the manager's risk-taking incentives.
Download or read book The Exercise and Valuation of Executive Stock Options written by Jennifer N. Carpenter and published by . This book was released on 1998* with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:
