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Costs and Incentive Effects of Stock Option Repricing

Costs and Incentive Effects of Stock Option Repricing

Paperback

Series: European University Studies, Economics and Management, Book 5

EconomicsSocial Movements

Currently unavailable to order

ISBN10: 0820465895
ISBN13: 9780820465890
Publisher: Peter Lang
Published: Jan 1 2004
Pages: 219
Language: English
Does repricing of executive stock options, i.e. the practice of lowering the exercise price when options are out-of-the-money unfairly reward managers for poor performance and thereby undermine incentives set by the compensation contract? In a study that compares the pay package containing repriced option with an otherwise adjusted package it is shown that repricing is not more expensive to shareholders than otherwise adjusting non-option compensation components. However, the package containing repriced options provides significantly stronger incentives. Furthermore, a policy that constrains the board of directors from repricing does not have significant effects on shareholders' returns.

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