When companies try to motivate their executives with compensation in the form of live farm animal options, it does not unendingly produce a hard movementing executive that readys it his goal to advance the company (and in turn, his stock price). The idea is that when an executive is offered the option to buy stock at a current low price, they will work harder within the company and cause the stock price to rise. This would supposedly guarantee the executive a financial kick upstairs in the future. It turns out that people are not working harder just finding a way to bring in more(prenominal) money from their stocks by falsification the visits of yield. When looking at the repercussions of falsifying the issuance date (backdating) of stock options, you start to see how the pretend itself could be considered unethical and illegal.
When a company backdates its stock options, it designates the issuance date at a date before the date the board made the decision to grant the stock options. What this does is set down the actual buying price so the executive gains more money in the end.
The growth of stock options as a component of executive compensation has been dramatic, commencing with the general acceptance of the thought that an equity stake in the company is necessary in revisal to align the interests of the executive with those of the shareholders (Smith, Gambrell, & Russel , 2003, ¶ 5). Unfortunately, this is not always the case. Instead of making the executive dependent on their stocks performance, it enables them to make bad judgment calls.
Stock options offer executives the opportunity to gain vast amounts of wealth without any of the drawbacks of penalties when the stock drops (loses money). In former(a) words, when the executive makes a bad business decision and the stock goes down, they will suffer no penalty to financial wealth. When their actions need no negative weight, they are not inclined to full point making these kinds of decisions which can lead the company down a road of...If you want to get a full essay, order it on our website: Orderessay
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