Does it benefit companies to give stock options to every employee or just executives?
Stock options have a positive effect on firm performance when they are granted to executives, but giving options to lower ranking employees seems to have no effect on the bottom line according to a new study co-authored by Stanford Business School Professor Ron Kasznik.
“Our findings provide evidence that options provide incentive effects at the executive level that are sufficiently large to be reflected in firm performance, but no evidence for similar incentive effects for non-executive employees,” wrote the co-authors: Nicole Bastian Johnson of the Haas School of Business at UC Berkeley, David Aboody of UCLA’s Anderson School of Management and Kasznik.
Kasznik and his colleagues also found that companies that had re-priced options for only executive-level employees significantly outperformed the companies that had not repriced at all. But firms that repriced options for only non-executive employees did not outperform the control group.
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