Costs and Incentive Effects of Stock Option Repricing

Download or read book Costs and Incentive Effects of Stock Option Repricing written by Ulrike Neubauer and published by Peter Lang Publishing. This book was released on 2004 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does repricing of executive stock options, i.e. the practice of lowering the exercise price when options are out-of-the-money unfairly reward managers for poor performance and thereby undermine incentives set by the compensation contract? In a study that compares the pay package containing repriced option with an otherwise adjusted package it is shown that repricing is not more expensive to shareholders than otherwise adjusting non-option compensation components. However, the package containing repriced options provides significantly stronger incentives. Furthermore, a policy that constrains the board of directors from repricing does not have significant effects on shareholders' returns."