Stock Options as Part of Compensation

By: Kelsey Hoffman

When taking a job, it is very important to look at the compensation package that you will be receiving. There are tangible and intangible benefits with each offer including your starting salary, commission, bonuses, paid sick or vacation days, and very often stock options. Many companies give stock options as part of their compensation plan in order to make employees more part of the company. These stock options usually have restrictions on them though and can only be exercised after the employee has worked for the company for a certain amount of time.

There are some issues though with stock options and discrepencies as to whether or not they are good motivation for employees as compensation. What if an executive had these stock options and decided to exercise and sell them immediately? Doesn’t he want a part of the company? Doesn’t he think these stocks are worth money? With these questions it makes shareholders weary of whether or not this company is a good investment. For this reason, Goldman Sachs decided that top executives would only receive stock options as a part of their bonuses as it made them more exclusive compensation. Financially this is a very smart idea because if the company goes under then the shares can be repossessed.

Sources:
http://www.signonsandiego.com/news/2009/dec/10/workers-can-exchange-worthless-stock/
http://www.benzinga.com/pressreleases/m59333/ecometals-amends-stock-option-plan
http://www.businessweek.com/bwdaily/dnflash/content/dec2009/db20091210_243210.htm