A marketing scheme for making money off innocent people: A user's manual
Firms often give away free goods with the product they sell. Firms often give stock options to their managers and employees. Mixing these two practices--giving stocks to consumers who buy the firm's product--creates a deadly brew. People can be lured into buying this product, giving the entrepreneur huge profits and the consumers a growing profit share. But this is a camouflaged Ponzi that will ultimately crash. It is argued, by analogy, that the common practice of giving stock options to employees can be a factor behind financial crashes. Understanding this can help create a better regulatory structure.
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