At the recent shareholders' meeting, the CEO of a small bank proposed a plan to offer each of its employees 250 incentive options for Class A common stock. The key provisions of the plan are that employees must exercise the options between January 2004 and December 2007, and if an employee terminates his or her employment with the bank (or is terminated), the options are no longer exercisable. One shareholder feverishly objected to the plan, claiming that such a move would dilute the value of the outstanding shares. As CEO, how would you defend the stock option plan to the shareholders?
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Though stock option involves dilution of ownership, it is the best way handling agency problem and rewarding employees. Stock option involves giving right to an employee to buy certain number of shares at a fixed price for specified period. It is more than dilution, it is sharing of ownership to achieve goal ...
Solution Summary
This explains the importance of stock option plan.
... December 2004, FASB issued a stock option expensing standard ... ability to understand how stock options impact the ... And equally important is preserving the ability ...
... Why it is important for managers to determine the value of real options in the capital budgeting decisions? ... 3) Why do firms issue stock dividends? ...
... With the stock options, managers can promote the long term ... Another drawback is that if the stock does not ... is assumed to be a vitally important influence on job ...
... It is important to note that volatility also ... the expected payoff should the stock move significantly ... 2. An options position established by purchasing one option...
... As important as the idea and the concept there are ... to borrow money, it issues loan stock, known as ... at a predetermined price - warrants and options are examples ...
... is important to evaluate the options for the ... information transmission function of Chinese stock market and ... in this field have analyzed the relative importance. ...
... executives and employees to "backdate" stock option grants so ... and simplicity to employee stock options designed to ... organization it is very important to watch ...
... The most important characteristic of an option is that it does not obligate its owner to ... When an investor "writes" call options against stock held in ...
... b. Why is this deference important? ...Options, Warrants, and Convertibles. Q1 Consider a European call option on stock A that expires on December 21 and has a ...
