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Why are employee stock options a good way to reward employees and management? What extra features...

Why are employee stock options a good way to reward employees and management? What extra features would you recommend building into a plan and why?

2-3 paragraphs please

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Answer #1

Employee Stock options provide additional shares to employees in case they meet their performance targets. . ESOP(Employee Stock options) are provided to employee so that they can also benefit from increasing share value. Since management donot want takeover bids by competitors due to job security issues but higher pay and ESOPS can align their interests with the shareholders.It also helps in reducing agency problems.
Extra features recommended in ESOPS are they should not be provided equally to all employees. Employees with performance should be provided more ESOPS. This will encourage employee to perform more. ESOPS should be linked with collective effort and result and not on individual effort or results.This will enhance collective performance of companies.

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