In recent months there have been many news stories in the press about executive
ID: 2383341 • Letter: I
Question
In recent months there have been many news stories in the press about executive compensation with stock options. This type of compensation occurs when an executive is granted the “option” to purchase the company’s stock at a certain price sometime in the future. The theory is if the executive is effective his management skills will lead to a higher stock price. As a reward the executive can purchase the stock at the earlier, lower price and lock in an automatic gain in his shares. However, certain companies have been falsifying the actual date when the stock options are granted to their executives. Research this situation on the internet or through the university library. Write a 400-word paper describing the situation and the implications of the practice including any legal or ethical ramifications.Explanation / Answer
Executive Compensation: Compensation for executive managers is different from compensation for other emploees in most organizations. Executive compensation covers employees that include company presidents, chief executive officers (CEOs), chief financial officers (CFOs), vice presidents, occasionally directors, and other upper level managers. These high level employees are paid executive compensation. The salary and other benefits are negotiated and are documented in a customized employment contract. The contract spells out compensation, benefits, perquisites, performance bonuses, separation and severance agreements, and other special terms of employment. Executive Compensation of Stock Options: Executive stock options are aimed at inducing managers to act in the best interest of shareholders by maximizing the value of the company. By tying part of the pay to actual performance as measured by thy price of the stock, managers would be more likely to work hard to increase the price of the stock otherwise they would forego the additional compensation. We define thotal compensation as salary and bonus plus other compensation, which includes vested restricted stock grants and stock gains. Stock holders (owners) interest and wealth will be protected by giving this stock options to top executives of company. They will work for this stock prices because they won't work properly the stock price will come down and they will get loss. Thank you....
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