Employee Stock Options

It is so important to appreciate that performance is important and essential, but a well-designed pay program must also attract and preserve high competence executives to enlarge shareholder value. On the other hand, different views have been declared about the relationship between pay and performance. For example, empirical evidence from the United States indicates a statistically major relationship but not a mainly strong economic relationship between the CEO’s remuneration and corporate performance. Where, in Australia, the limited number of studies in this field have found that CEO pay is related to company size (the larger the company, on average the higher the pay) but is not linked in any clear way to corporate performance.

Los sistemas de remuneración a la dirección incluyen hoy día, particularmente en las grandes empresas, sistemas de incentivos o primas asociadas al objetivo de creación de valor
económico, normalmente denominado creación de valor para el accionista. En particular, desde los años 50 han tomado cuerpo las opciones sobre acciones (stock options) que están
representando porcentajes muy significativos de la remuneración de dichos directivos, sobre todo en los países anglosajones, aunque, cada vez más, también en otros países europeos como España.

Las opciones sobre acciones se sustentan en la idea básica de enlazar los intereses de
la dirección y de los accionistas y normalmente están relacionadas con el valor de mercado de
los títulos sobre los que se ofrece la opción. Es por ello que, básicamente, este tipo de
incentivos o primas se ofertan para directivos de sociedades cotizadas.

No obstante, la creación de valor hay que buscarla en las unidades operativas,
unidades estratégicas o divisiones de empresas y las propias empresas que operan como tales
y no están cotizadas. 

En el trabajo que se presenta, tras una breve introducción , se aborda en primer lugar (epígrafe 2) el objetivo de creación de valor económico en la empresa y los sistemas de primas de remuneración asociados a la estrategia empresarial a largo plazo (Epígrafe 3) para en el epígrafe 4 ofrecer una visión de la remuneración de directivos de unidades operativas basado en la creación de valor para el accionista.

Las conclusiones  más relevantes ponen de manifiesto que en mercados competitivos la remuneración a los directivos, de unidades de negocio o de corporaciones, han de estar ligadas a la creación de valor por encima de la estrategia común del sector y no sólo al valor económico de la unidad al que una determinada estrategia llegue. La ventaja del sistema analizado estriba en que tanto los directivos como los propietarios del negocio conocen cuál
es el factor o factores que dan lugar a creación de valor diferente a la estrategia común.

Background and purpose: Although employee share ownership (ESO) deserves of a long tradition, we still know little about employees' perspectives about ESO. The lack of knowledge about the employees' attitudes towards ESO is discursively filled in the ESO debate. This paper challenges that deficit by carrying out a semantic analysis of the literature with the aim to identify the various actor constructions used implicitly in the ESO discourse. Design/Methodology/Approach: We conduct a semantic analysis of the ESO discourse. To unfold the order of this discourse we draw on the distinction between surface and underlying structure of communication in the sense of Michel Foucault. We interpret some semantic lead differences, a term coined by Niklas Luhmann, to constitute the underlying structure of communication. Results: We can identify six different streams on the ESO discourse's surface level each defined by the ends pursued. The discourse's underlying structure is made up of the distinctions production-consumption, capital-labour, and ownership control that also determine the actor models implicitly in use. Conclusion: We can identify five different actor models implicit in the ESO discourse. While the CEE discourse differs on the surface level in as far as it is more concerned with questions of political legitimation of the privatisation process than with questions of economic efficiency, thus introducing political distinctions in the discourse rather missing in the west, it shares the underlying semantic lead differences with the Western discourse as well as the actor models anchored in those differences.

Using data collected from interviews with human resource managers, corporate executives, and compensation consultants in India, this paper examines the adoption of US-style employee stock option (ESO) plans among Indian information technology firms and foreign-based multinational corporations operating in India between 1998 and 2004. The findings suggest that Indian firms adopted ESOs more cautiously and granted options more selectively than those in Silicon Valley, where, by the mid-1990s, very broad grants at all organizational levels had become commonplace. The data also suggest that this more cautious and selective approach in India was driven primarily by labor market conditions, and a lack of cognitive-cultural and normative alignment between the ESO practice and the institutional environment of Indian knowledge workers. By taking seriously the perspectives of actors who play key roles in processes of practice adoption, the analysis and findings raise the issue of how our understanding of cross-national variation in the diffusion and structure of employee ownership practices, particularly in new settings, can be enhanced by new research designs and a deeper engagement with more recent developments in international human resource management research and institutional theory.

Abstract: Accounting for employee stock options (ESO) has been one of the most controversial topics in accounting during the last decade. After the wave of recent corporate scandals, the controversy over employee stock options has intensified and arguments are being made in favor of expensing ESO in the actual income statement. FAS 123 (R) is the new financial accounting standard introduced by the Financial Accounting Standards Board (FASB) that requires companies to deduct the amount of share-based (equity) payment ...

ABSTRACT We analyze the American option valuation problem with the forward performance criterion introduced by Musiela and Zariphopoulou (2008). In this framework, utility evolves forward in time without reference to a specific future time horizon. Moreover, risk preferences change with stochastic market conditions, which is natural as investors are clearly more risk averse in economic downtimes. We examine two applications: the valuation of American options with stochastic volatility and the modeling of early exercises of American-style employee stock options. Finally, we introduce the marginal forward performance price introduced by Davis (1997). Among others, we find that, for arbitrary preferences, the marginal forward indifference price is always independent of the investor's wealth and is represented as the claim's risk-neutral price under the minimal martingale measure.

We examine the information content of insider employee stock option trading and its value to market investors using a US dataset. There should be no presumption that option trading would not convey valuable information and indeed, the exercise of option rights is likely to signal insider knowledge. Our results from Granger-causality tests suggest that the actions of directors, officers (senior