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| Author: | Stoughton, N.M. Wong, K.P. |
| Title: | Option compensation and industry competition |
| Journal: | Review of finance
2009 : JAN, VOL 13:1 p. 147-180 |
| Index terms: | corporate governance stocks prices staffing incentives markets |
| Language: | eng |
| Abstract: | This article takes a new look at the compensation policy which has become one of the most important parts of corporate governance. The use of options with stock is contrasted by integrating the repricing or resetting aspect of options with that of industrial structure. It is shown industry competition may play an important role in dictating which form of compensation is optimal. When aggressive competition for key professional staff is an issue, the flexibility of options may actually become a disadvantage and therefore pure stock compensation may survive as an equilibrium. Thus compensation trends may be partly explained by trends in the nature of the competitive environment. |
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