Originally Posted by chiefzilla1501
So then you would agree that an executive may be motivated to boost short term initiatives that drive up the stock price in order to exercise options instead of long term initiatives to boost long term value? You have three years vested which isn't bad (I've heard people say 4 is optimal) but in situations where you have less, that just encourages CEOs to inflate value, cash out, then claim that problems in the future are somebody else's problem.
Not to mention the way issuing options dilutes shareholder value by giving them significantly less ownership stake in a company.
I am a firm believer that executives will take what they're given. Again, this is less of an indictment on executives as it is the compensation structure that encourages bad behavior.
The longer required time the better for an option, yes. But I may be wrong but I believe IRS rules define the terms of any option nowadays. Its been a while since I was involved in options and in incentive awards. (Nowdays, I have to give myself a performance review and usually I reward myself with something outlandish like a fishing reel or a new pair of insulated carharts and a few chainsaw blades.)
That said, I know my compensation was strongly tied to our business plan, I had to deliver on both sales as well as net, and I had to manage the budgets for the business. I had metics applied to all of those as well as the non numeric measurements applied to how well I did by job managing my staff and how well I did in participation on our strategic planning team and the information management team. Each level of compensation was tied to a lot of other things so that we did not have bad long term decisions that were only made to look good for a year or a quarter.
I worked for two outstanding fortune 500s. Both managed extremely well. And both would hang your ass if you did things that were not in the best interest of your sphere of responsibility and not in keeping with the 5 year plan that consistently drove business decisions.