Costs and Incentive Effects of Stock Option Repricing |
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Author:
| Neubauer, Ulrike |
Series title: | Europische Hochschulschriften / European University Studies / Publications Universitaires Europennes Reihe 23: Theologie / Series 23: Theology / Srie 23: Thologie Ser. |
ISBN: | 978-3-631-52401-5 |
Publication Date: | Apr 2004 |
Publisher: | Peter Lang GmbH, Internationaler Verlag der Wissenschaften
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Book Format: | Paperback |
List Price: | AUD $125.95 |
Book Description:
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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...
More DescriptionDoes 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.