Stock Option Repricing in Europe

2008 ◽  
Author(s):  
Michael Sauer ◽  
Zacharias Sautner
Keyword(s):  
Stock Option ◽  
Option Repricing ◽  
Stock Option Repricing

Stock Option Repricing and Its Alternatives: An Empirical Examination

2009 ◽  
Vol 44 (6) ◽  
pp. 1459-1487 ◽  
Author(s):  
Swaminathan Kalpathy
Keyword(s):  
Human Capital ◽  
Stock Price ◽  
Conflicts Of Interest ◽  
Multinomial Logit ◽  
Agency Cost ◽  
Stock Option ◽  
Empirical Examination ◽  
Internal Governance ◽  
Option Repricing ◽  
Stock Option Repricing

AbstractIn this paper I examine the likelihood of CEO stock option repricing and its alternatives: namely, option grant, stock grant, and “do nothing.” Multinomial logit results suggest that firms reprice options to increase sensitivity of pay to stock price and to temper down sensitivity of pay to volatility. Moreover, repricing firms are younger and more concentrated in industries where human capital is important. Finally, I find no evidence that internal governance or executive conflicts of interest are relevant in explaining repricing. My results indicate that repricing is motivated by incentive alignment and retention, and not by agency cost considerations.

Cendant Corp.: A Case Study Examining the Compensation and Accounting Issues Involved in a Stock-Option Repricing Program

2001 ◽  
Vol 16 (3) ◽  
pp. 409-441 ◽  
Author(s):  
Thomas J. Vogel
Keyword(s):  
Stock Price ◽  
Stock Options ◽  
Poor Performance ◽  
Stock Option ◽  
Compensation Committee ◽  
Corporate Executives ◽  
Price Increases ◽  
Exercise Price ◽  
Option Repricing ◽  
Stock Option Repricing

Stock options are usually issued to corporate executives in an attempt to align the interests of those individuals with the interests of the company's shareholders. The options are designed to provide a large payoff to the executives when the company's stock price increases substantially above the exercise price of the options. However, in those periods when a company performs poorly, its stock price may decrease to a level below the exercise price of outstanding options. When this occurs, the options are said to be “underwater.” Because options provide a benefit only as the stock price increases, underwater options will often lack the motivational incentive that they were designed to create. This creates a dilemma to the compensation committee of the company—i.e., modify the compensation agreements of the individuals in charge during the period of poor stock price performance or risk losing those executives to other companies. One such modification that is often considered in these circumstances is a stock-option repricing program. Here, underwater stock options are exchanged for new options containing a lower exercise price. These programs experienced increased popularity during the 1990s despite the opposition that arose from critics who claimed that repricing programs “rewarda” executives for poor performance. This instructional case requires students to evaluate the appropriateness of a stock-option repricing program for the executives and other employees of Cendant Corp. This company experienced a severe decrease in its stock price during 1998 as a result of many factors including an accounting scandal, failed expansion efforts, and poor market conditions. In addition, the case material can also be used to introduce students to the accounting implications of stock-option repricing programs as modified by Interpretation No. 44, issued by the Financial Accounting Standards Board in March 2000.

Stock Option Repricing: Heads I Win, Tails You Lose

2004 ◽  
Vol 50 (4) ◽  
pp. 297-312 ◽  
Author(s):  
Avinash Arya ◽  
Huey-Lian Sun
Keyword(s):  
Stock Option ◽  
Option Repricing ◽  
Stock Option Repricing
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