Traditionally, stock option plans have been used as a way for companies to reward top management and "key" employees and link their interests with those of the company and other shareholders. More and more companies, however, now consider all of their employees as "key." As a result, there has been an increase in the popularity of broad-based stock option plans, particularly since the late 1980s. Publicly traded companies such as Pepsico, Starbucks, Southwest Airlines, and Cisco now give stock options to most or all of their employees.
I What is a stock option ?
1. Stock options characteristics
2. Stock Options and Employee Ownership
II Incidence and effects of stock options
1. European stock markets
2. Stock options influence on behaviour : myth or reality ?
[...] Firstly by defining stock options characteristics then by analyzing its incidence and effects on employees' behaviours (II). I What is a stock option ? 1. Stock options characteristics A stock option gives an employee the right to buy a certain number of shares in the company at a fixed price for a certain number of years. The price at which the option is provided is called the "grant" price and is usually the market price at the time the options are granted. [...]
[...] This type of argument also rests on the assumption that the stock market is myopic, and that managers adopt short-term horizons to meet investor expectations. As a conclusion, stock options have been designed as a tool for recruiting, motivating and retaining high calibre employees, whatever their position. However, aside from the economy” small companies, where stocks were widely targeted at all levels of employees, this mainly affects managerial employees. It means that option plans have partly failed to achieve their goals, due to their mixed results. [...]
[...] Of the mainland European nations, France has the longest tradition of stock options owing to legislation in this area in 1970. A survey by COB (Commission des Opérations de Bourse) in France in 2002 of publicly quoted firms found that over one in two firms had a stock option plan (Plan d'Options en Actions, or POA).In Germany, the use of stock options is very recent because until 1998 company law effectively prohibited stock options. Instead, Germany firms wishing to use incentive reward systems used either profit sharing or profit-related bonuses, Stock Appreciation Rights, or convertible bonds Stock options influence on behaviour : myth or reality ? [...]
[...] The dilutive effect of options, even when granted to most employees, is typically very small and can be offset by their potential productivity and employee retention benefits Stock Options and Employee Ownership Are options ownership? The answer depends on whom you ask. Proponents feel that options are true ownership because employees do not receive them for free, but must put up their own money to purchase shares. Others, however, believe that because option plans allow employees to sell their shares a short period after granting, that options do not create long-term ownership vision and behaviours. [...]
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