Critically evaluate the use of share option to align directors' interests with shareholders' interests.

Introduction Enthusiasts have long argued that sh atomic number 18 option schemes provide circumspection with a powerful pauperization tool. Stock ownership sets employee and shargonowner interests will strengthening employee levels of commitment. In an increasingly competitive art environment, options are a way to inveigle and retain discover employees such as managing director or Chief executive officer (COE). According to Whittker, employee must knead and behave as genuine administer toters to equate investor and shareholder interests (Hayward, 2001, p. 8). This endeavor firstly discusses the arbitrariness of share option, explain how share options align manager and shareholders interest, and eventually confer possible problems with share options. What is share option? According to Ross et al option is a sign that gives its owner the right to purchase or sell few asset at set impairment on or before a addicted date. Options are a quaint type of financial contr act because they give the vendee the right, besides not the obligation, to do something. The secureer uses the option only if it is profitable to do so; otherwise the option prat be thrown and twisted away (Ross, Thompson, Christensen, Westerfield &type A; Jordan, 2001, p. 687). The asset involved in an option could be anything. The options that are most widely bought and interchange are share options. These are options to buy and sell shares.

A connection option is a corporate security that gives the holder the right, but not obligation, to buy shares directly from a company at a decided price for a precondition period. Each company options declare the number of shares that the h older can buy; the exercise price and the ex! piration date. Company options commonly have much long-life maturity periods (Ross et all p. 711). part option aligns manager and shareholder interest As to the authorisation theory, individuals are rational and maximize their utility (Wong, 1988, If you want to hand a full essay, order it on our website: OrderEssay.net

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