Download or read book Essays on Employee Stock Options and Executive Compensation in non Diversified Companies written by Pavlo Tsebro and published by . This book was released on 2013 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay I. Prior literature suggests three explanations for why companies are granting stock options as a form of compensation to non-executive employees. Broad-based option grants can be used as an incentives tool, a sorting mechanism, and a means of assisting with employee retention. An alternative explanation also exists, namely, that financially constrained firms use broad-based option grants as a form of self-financing. This dissertation contributes to existing literature by examining the financial-constraints hypothesis in firms' option-granting practices. It is the first study to combine two independent approaches in testing the financial-constraints hypothesis in firm-wide option grants. Using simulated and empirical returns in utility model for a representative individual employee, I investigate whether option-based substitutions for a portion of payment in cash can result in economic savings to firms. Secondly, using empirical data on broad-based option grants and utilizing a financial constraints index and individual variable proxies for constraints, I examine the relationship between option grants and the severity of financial constraints to which the firm is subject. I find that direct financial benefits to the firm from the use of option grants are, in general, possible. However, sorting is more likely primary reason for using broad-based option grants, while self-financing is a positive side effect of sorting. Essay II. Agency problems are generally viewed in the literature as one of the reasons why the diversification discount exists. The adoption of equity-based forms of pay (EBC) in CEOs' compensation is considered one way of mitigating agency problems and thus enhancing the value of the firm. Essay II investigates how the intensity of EBC impacts the valuation of diversified firms in two dimensions of diversification: industrial and geographic. Building on the prior literature, this study takes a multi-dimensional approach by considering the combined effects of EBC levels, degrees of product, and geographic diversification on the valuation of the firm. Based on the results of this study I conclude that a firm's valuation is negatively affected by geographic diversification, but it is positively related to industrial diversification, while firms pursuing dual diversification strategies are valued at a discount. Use of the EBC helps to mitigate agency problems and has a positive effect on the firm's valuation. Finally, as a secondary objective I investigate whether regulatory changes (adoption of the SFAS No. 131, FASB 1997) affect the nature of the reported segment data. I find that new regulations do not materially alter the nature of the reported segment data, at least for the purposes of this study.

Download or read book The Complete Guide to Employee Stock Options written by Frederick D. Lipman and published by Prima Lifestyles. This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous private and public companies offer stock option plans every year to motivate, retain, and reward employees. But implementing the right stock option plan can be a complex and daunting undertaking, without the proper guidance.The Complete Guide to Employee Stock Optionsunravels the mystery of creating a meaningful equity compensation plan for employees that is favorable for the business. Author and attorney Frederick D. Lipman describes in complete detail the legal, operational, and motivational aspects of developing a stock option program, whether it's for the new start-up looking to attract top talent or the venerable company looking for ways to reward its best performing employees. Readers will discover how to: * Understand the pros and cons of different option plans* Implement the right plan to meet the company's future plans* Motivate key employees with equity compensation* Minimize the risk of losing equity in a volatile market* And much moreThis book also includes useful information for employees who want to understand what their stock options mean and how to maximize their profitability. Complete wi

Download or read book Employee Stock Option Compensation written by Florian Wolff and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Florian Wolff analyses how executives perceive their stock options and how their personal expectations and risk preferences affect the value they assign to them. He shows that stock options may be worth their money because people behave irrationally.

Download or read book Understanding Employee Stock Options Rule 144 Concentrated Stock Position Strategies written by Travis L. Knapp and published by iUniverse. This book was released on 2001-02-20 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: Knowledge is NOT an Option How much of your net worth is concentrated in one stock? Are you concerned about the volatility of the market? Would you like to be more diversified? Do you understand how a variable prepaid forward contract, a protective put contract, or a zero-premium collar can help to protect your concentrated position? Do you need more liquidity? Are you an insider or affiliate that would like to reduce your risks without actually selling your stock? Are you interested in reducing your taxes by nearly half? Do you know the key differences between non-qualified stock options and incentive stock options that will affect how much tax you pay? Will Alternatives Minimum Tax affect you upon exercise of your incentive option? Are you familiar with the benefits and risks of making a Section 83(b) election? Do you know what transactions are considered a disqualifying disposition or a constructive sale? Can knowing the answers to these questions make you more confident and financially secure?

Download or read book Essays on the Role of Executive Compensation in the Subprime Mortgage Crisis and the Incentive Effects of Executive Stock Options written by and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Granting Stock Options written by George B. Paulin and published by . This book was released on 1996 with total page 32 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 Companies. This book was released on 2004 with total page 202 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 Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.

Download or read book Executive Compensation in ESOP Companies written by Corey Rosen and published by . This book was released on 2012-10 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Executive Compensation Using Relative Performance Based Options written by Lisa K. Meulbroek and published by . This book was released on 2008 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how an option plan that rewards managers for firm performance relative to some market or industry benchmark should be structured, and gauges the deadweight costs of such a plan. Relative-performance-based compensation advocates contend that conventional stock options do not adequately discriminate between strong and weak managers, typically suggesting quot;indexed options,quot; that is, options with an exercise price linked to a market or industry index, as a remedy. A close examination of indexed options, however, reveals a fundamental problem: indexed options do not function as intended. Instead, their payoff remains highly sensitive to market or industry price movements. This paper proposes an alternative option design that does remove the effects of the desired benchmark. This structure uses an option with a fixed exercise price, where the underlying asset is a portfolio comprised of the firm's stock hedged against market and industry price movements. The paper then compares the deadweight cost of this performance-benchmarked option to that of a conventional stock option. Deadweight costs inevitably accompany any equity-based compensation program, because the firm's managers must be exposed to firm-specific risks to properly align incentives, and this forced concentrated exposure prevents managers from optimal portfolio diversification. Undiversified managers are exposed to the firm's total volatility, rather than the smaller systematic portion faced by the well-diversified investor, meaning that they will always value their stock- and option-based compensation at less than its market value. I estimate the cost of this lost diversification, and find that, perhaps surprisingly, the gap between the firm's cost (the market value) and the manager's private value of an option is 57% greater for relative-performance-based options than for conventional options. The relative-performance based options have larger deadweight costs because, by design, they strip away the manager's exposure to all systematic risk, leaving her with a portfolio with an expected return no better than the risk-free rate. The paper discusses the practical implications of this analysis for firms adopting relative-performance-based option plans.

Download or read book Executive Compensation in ESOP Companies written by Neil Brozen and published by . This book was released on 2017-08 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 Optimal Executive Compensation written by and published by . This book was released on 1999 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Employee Benefits and Executive Compensation written by Samuel Estreicher and published by Kluwer Law International B.V.. This book was released on 2010-01-01 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: Employee benefits and executive compensation, long a matter of considerable interest to employees and employers, have become subjects of increasingly intense public scrutiny and debate in the past few years. Indeed, you cannot pick up a newspaper, listen to a news broadcast, or consult the Internet without encountering a report on these subjects. These issues played heavily during the 2008 presidential campaign.

Download or read book Executive Compensation written by Gary Girous and published by Business Expert Press. This book was released on 2014-12-08 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: The chief executive officer (CEO) of a corporation and his or her executive team are responsible for the management of the business and its continued operating and financial success. The CEO and executive team are almost always highly compensated and the relative total compensation has mushroomed over time. Most of the compensation now is designed to be performance-based, but leading to charges that executives have incentives to manipulate corporate earnings and stock price in the short-term for their own self interests. The compensation at some companies became so egregious that compensation again became a major public policy issue subject to federal regulation. Executive Compensation focuses on the major topics related to executive compensation—present, past, and future. First, is understanding what executive compensation is, including composition and objectives of pay contracts. Second, how do specific compensation agreements affect corporate behavior and performance? Third, what are the major components, including how and what are accounted for and disclosed? How is compensation, especially executive compensation, accounted for—that is, what are the calculations and journal entries required? Fourth, what does historical analysis tell us about the topic, especially how contractual decisions have been made and what has worked. Finally, what is in store for the future—both expected compensation agreements and what the compensation incentives suggest for future corporate decisions on operations and accounting manipulation.

Download or read book After Enron written by William A. Niskanen and published by Rowman & Littlefield. This book was released on 2007 with total page 414 pages. Available in PDF, EPUB and Kindle. Book excerpt: After Enron addresses the major lessons about accounting, auditing, taxation, and corporate governance that are illustrated by the collapse of Enron and other recent major corporate scandals. The book then develops a set of proposals for changes in public policy that would lead accountants, bankers, board members, lawyers, and corporate managers to better serve the interests of the general public.

Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. Concentrates on underlying principles that change little, even as the empirical literature moves on Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field’s substantive findings, all of which help point the way forward