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This would boost the stock price and generate more profit for executives on their subsequent sale of stock.One solution would be for companies to amend their option plans so that the employees are required to hold the shares for a year or two after exercising options.The Valuation Debate: Intrinsic Value or Fair Value Treatment?How to value options is not a new topic, but a decades-old question.In the debate over whether or not options are a form of compensation, many use esoteric terms and concepts without providing helpful definitions or a historical perspective.This article will attempt to provide investors with key definitions and a historical perspective on the characteristics of options.
EPS growth could then be maintained (and the share price stabilized) as the reduction in SG&A expense offsets the expected decline in revenues.
Also, options programs require a vesting period (generally several years) before the employee can actually exercise the options.
The Bad For two main reasons, what was good in theory ended up being bad in practice.
Members of boards of directors incestuously granted each other huge option packages that did not prevent flipping, and in many cases, they allowed executives to exercise and sell stock with less restrictions than those placed upon lower-level employees.
If option awards really aligned the interests of management to those of the common shareholder, why did the common shareholder lose millions while the CEOs pocketed millions?