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    Stock Options as a Hotly Debated Issue

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    Stock options has been, and continues to be, a hotly debated issue. What do you think are some of the root causes of this problem? What do you think could be done to solve, or at least partially mitigate, this problem? What parties do you think should take the lead in addressing this problem, and do you think that to date these parties have always acted in the best interests of the public? Why, or why not?

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    Solution Preview

    The problem with stock options is that they're granted to employees to buy the stock at a certain price, which the employees can then exercise at a certain time, but many companies have abused stock option granting rights. Stock options set up an immeasurable climate for weak internal controls and fraud. Management oftentimes in the past has taken advantage of stock options and manipulated company financial information so that the stock price would move in a certain direction, and the manager then exercises the options to gain maximum value. Stock options have been reduced in recent years because companies found that as they were, the incidence and level of managerial fraud from financial data manipulation also decreased. The root cause ...

    Solution Summary

    This solution explains the controversy regarding stock options, the root causes of the problem, as well as solutions to the problem. All issues regarding stock options are thoroughly discussed.