The Trouble with Stock Options
The trouble with options is that too many options are granted to too many people. Most options are granted below the top-executive level, and options are often an inefficient way to attract, retain and motivate executives and (especially) lower-level employees. Why, then, are options so prevalent? We discuss several explanations including changes in corporate governance, reporting requirements, taxes, the bull market and managerial rent-seeking. We also offer an alternative hypothesis that we believe explains the over-use of options and several apparent puzzles: boards and managers falsely perceive stock options to be inexpensive because of accounting and cash-flow considerations.
|Date of creation:||Jun 2003|
|Date of revision:|
|Publication status:||published as Hall, Brian J. and Kevin J. Murphy. "The Trouble With Stock Options," Journal of Economic Perspectives, 2003, v17(3,Summer), 49-70.|
|Note:||CF LS PE|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lucian Arye Bebchuk & Jesse M. Fried, 2003.
"Executive Compensation as an Agency Problem,"
NBER Working Papers
9813, National Bureau of Economic Research, Inc.
- Aboody, David, 1996. "Market valuation of employee stock options," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 357-391, October.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Espahbodi, Hassan & Strock, Elizabeth & Tehranian, Hassan, 1991. "Impact on equity prices of pronouncements related to nonpension postretirement benefits," Journal of Accounting and Economics, Elsevier, vol. 14(4), pages 323-346, December.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9784. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.