Structuring Option Grants to Pay for Performance

Abstract

Options have become an ever-increasing part of executive compensation for start-ups, buyouts, and existing public companies. This article discusses the two major flaws with many current option plans, to wit: 1) that the exercise price does not change over time; and 2) that the time in which an executive can purchase the options is not limited. This article discusses how to address these problems and why options remain a vital compensation scheme.