business finance

BUSINESS FINANCE

A statement goes , Market efficiency implies that good investment decisions by managers should be translated into higher share prices It is further recommended that issuing share options be considered an effective way of reducing the agency problem , for it ensures that managers make investment decisions which would maximize the value of the business

Based on the these lines , it would seem that the issuance of share options to managers of an agency or a company is seen as a proven method of improving their performance , which would mean better

results of operations , higher profits and subsequently , higher prices of the shares in the market

An employee stock option is a call option on the common stock of a company , issued as a form of non-cash compensation . If the company 's stock rises , holders of options experience a direct financial benefit This gives employees an incentive to behave in ways that will boost the company 's stock price (Wikipedia

Employee stock options are mostly offered to management as part of their executive compensation package (Wikipedia ) To employees , being given stock options is considered a privilege or a considerable benefit accorded by the company . Stock options are issued only to deserving managers or employees . Companies have their respective rules and standards governing stock options issuance as a practice

On the part of the managers and employees who become recipients of stock options , such issuance entitles them to the prerogative to buy stocks of the company within a given period of time at a given , usually attractive , price . Thus , they can make money out of the whole transaction by buying stocks from the company at a certain price and then selling it at the stock market - if the company happens to be one of those listed and traded in the local bourse - at a premium or a profit . On the other hand , they can simply choose to keep the shares stay as outstanding company shareholder and then receive dividends whether stock or cash , subsequently

On the part of the company issuing the stock options to identified managers and employees , such issuance will mean ownership by their own people of the company shares . This should effect improved levels of loyalty , productivity and effectivity among the managers and employees Those already entitled to the stock options will relish being an eventual shareholder of the company (that is , if they are not yet existing shareholders , while those who are not yet accorded the same benefit will have reason to work hard and to deliver better output so as to themselves be recipients of the same stock options . It is a promising scenario for both the current and prospective holders of stock options

Given all these , the issuance of stock options should mean more benefit and practically no harm to the company

It is an irrefutable fact that managers of the company are in critical positions to make decisions that affect the overall well-being of the company . Being managers , they have been trusted by...