Question

Your CEO likes the idea of granting performance-based stock options, but she wants to include individual employee performance criteria in your plan. What problems might this cause and how would you best design a plan that would accommodate her request but ameliorate the problems?

Answer 1

This would lead to problems like conflict of interest because the employees or managers will then work for their own benefit rather than working for shareholders and thus would lead to rise in the agency cost. For example- shareholders might want to increase the composition of risky projects so that the chances of positive projects shall increase.

For reducing this problem, and bestly accommodate in the best interest, i will organise a plan in which there is a bi annual review of objective evaluation for each employee and the bonuses are linked to the performance.

Thus the employees will tend to work in shareholders benefits

I hope this helps.

Took real efforts.

Please press the like button

Thanks