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The use of options in compensation packages

Management Research News

ISSN: 0140-9174

Article publication date: 1 April 2004

3252

Abstract

Stock options, once exclusive to executives, are now becoming more broad based to include middle management and non‐management employees. In 2000 an estimated 10 million workers’ compensation packages contained stock options. In today’s competitive environment, firms are looking for ways to attract and retain workers, reward outstanding performance, and return value to shareholders while minimising costs. Stock options provide such a vehicle. The paradox is that while stock options are intended to tie pay to performance, many employees lack the knowledge of how the options actually work. Employees need to be educated as to the different types of plans and how it affects their total compensation. A contentious debate exists over whether firms actually benefit from stock options plans and the reasons why some prosper while others fail. Researchers and experts agree that the success of a stock option plan lies largely in how effective firms are at managing the plan and communicating it to its employees.

Keywords

Citation

Williamson, J.A. and Kleiner, B.H. (2004), "The use of options in compensation packages", Management Research News, Vol. 27 No. 4/5, pp. 23-31. https://doi.org/10.1108/01409170410784437

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

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