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 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 A General Framework for Evaluating Executive Stock Options written by Ronnie Sircar and published by . This book was released on 2010 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by recent recommendations by both European and American accounting standards boards that executive stock options be expensed in firms' statements, we provide an analytical and flexible framework for their evaluation. Our approach takes into account the vesting period, American style, resetting and reloading provisions that are features of many options programs, and also considers the trading restriction on executives. We identify a recursive structure in the stream of options that are granted to the executive over the course of her employment. By exploiting this, we are able to obtain a near-explicit formula for the option value. This enablesus to discuss the joint effects of the different features on the exercising strategies and firms' granting cost. Especially, we highlight some significant interactions among these features.
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 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 Revenue Act of 1963 written by United States. Congress. Senate. Committee on Finance and published by . This book was released on 1963 with total page 1324 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 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 The Family Lawyer s Guide to Stock Options written by Lester Barenbaum and published by American Bar Association. This book was released on 2007 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over 14 million American workers receive employee stock options, making it likely that the issue will arise in an upcoming divorce case. This handy, practice-focused guide provides comprehensive guidance on the valuation, taxation, and distribution of stock options in divorce. It includes sample provisions for property settlement agreements, a 50-state survey of all reported options cases, checklists, charts, glossary, and CD-ROM of appendices.
Download or read book The Repricing of Executive Stock Options written by Don M. Chance and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the incidence of corporations lowering the exercise prices of their executive stock options. These options can be viewed as a combination of a down-and-out call option and a down-and-in call option with the exercise price equal to the barrier. Using barrier option pricing theory, we find that at a minimum this features adds 7-10 percent to the value of the options on the grant date. We also examine the market, industry and firm-specific performance of a sample of 37 firms and 53 reset events. The period covered was 250 days before and after the day on which the firm reset the exercise prices of its executive stock options. The evidence strongly supports the conclusion that resetting the exercise price follows a period of poor firm-specific performance. The magnitude of the reduction in the exercise price was positively related to the firm's stock price performance and using a value- weighted market portfolio, it was negatively related to the market's performance. No evidence supports the contention that lowering the exercise price brings an end to the firm's problems and leads to an increase in shareholder wealth. Though the direct dollar impact at the time of the reset is relatively small to the shareholders, it is not insignificant to management. Allowing for the possibility of resetting after a stock price decline can create a perverse incentive under certain circumstances for managers to deliberately drive the stock price down further. In addition management has a greater incentive to engage in high risk projects than it would have with ordinary non- esettable options. These incentives and our results that the resets are indeed done, sometimes repeatedly, following poor firm-specific performance suggest that resetting is not in the best interests of shareholders, who should certainly question this practice.
Download or read book The Code of Federal Regulations of the United States of America written by and published by . This book was released on 2006 with total page 1160 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Code of Federal Regulations is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government.
Download or read book Code of Federal Regulations written by and published by . This book was released on 1996 with total page 718 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book President s 1963 Tax Message written by United States. Congress. House. Committee on Ways and Means and published by . This book was released on 1963 with total page 2206 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Congressional Record written by United States. Congress and published by . This book was released on 1964 with total page 1452 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Accounting for Stock Options written by Daniel Lincoln Sweeney and published by . This book was released on 1960 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: The disappearance of her husband is only the first of the mysteries Mrs. Carillon must solve.
