Corporate Governance and the Design of Stock Option Programs
Investors and academics increasingly criticize that various design features of executive stock option (ESO) plans reflect self-dealing by managers and the inability of corporate governance mechanisms in monitoring executives (managerial power hypothesis).We use a unique and not publicly available data set to investigate design features of ESO programs. The companies in our sample show a very large variation with respect to the characteristics of their ESO plans (e.g. in the use of relative performance targets that need to be met before options become exercisable).We study the relationship between the design of ESO plans and corporate governance structures to test the managerial power hypothesis.We document that when governance structures are weak, option plans are designed in a way desired by managers. When ownership concentration is low, firms more often have ESO plans that are favorable to executives. We also find that firms with fewer outside board members and weaker creditor rights more often have option plans that are favorable to managers. Favorable ESO plans usually coincide with large option packages.
Stock Option Programs Program Design Corporate Governance Empirical Evidence
Zacharias Sautner Martin Weber
University of Amsterdam, Finance Group, Roetersstraat 11, 1018 WB Amsterdam Oxford Financial Researc Lehrstuhl fur Bankbetriebslehre, Universitat Mannheim, L 5, 2, 68131 Mannheim, Germany and CEPR, Lon
国际会议
成都
英文
1-49
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）