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Why are stock options a controversial employee benefit, particularly for top executives?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter10: Corporate Governance

Section: Chapter Questions

Problem 5Q: How is it possible for an employee stock option to be valuable even if the firms stock price fails...

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How is it possible for an employee stock option to be valuable even if the firms stock price fails to meet shareholders expectations?
What is the possible agency conflict between inside owner/managers and outside shareholders? What are some possible agency conflicts between borrowers and lenders? How is it possible for an employee stock option to be valuable even if the firm’s stock price fails to meet shareholders’ expectations?
Write a brief description of the logic behind the development of the time value formula for annuities. Why does stock-based compensation create a moral hazard for executives?
“Stock options are generally a more appropriate form of compensation for lower-level managers than for higher-level managers.” Do you agree with this statement?
How would you explain what Employee Stock Options are? What are their benefits for a company and its employees?
What does it mean to say that managers should maximize shareholders' wealth "subject to ethical constraints"? What ethical considerations might factor into decisions that result in lower cash flow and stock price effects than they might have otherwise been valued?
What conflicts of interest can arise between managers and stockholders?
What kind of option can be used to incentive CEOs? Discuss the difference between stock option compensation and stock compensation.
What do you think is the main issue of conflict between the stockholders and managers?
Why are managers, rather than employees, more likely to engage in unethical behavior in capital and investment processes?
what does it mean to say that managers should maximize shareholders wealth subject to ethical constraints?
Why do you think active short sellers publish or disclose their short positions despite the criticism from the shareholders?