Weighing the options. The explosion in employee stock option grants during the 1990s continues to fuel debate over their fairness to public shareholders. But CFOs see little cause for concern.
Few issues stir up as much controversy among shareholder activists as corporate stock option grants.
Critics have produced a familiar litany of gripes. Options, they charge, reward top managers excessively for just average performance, dilute earnings per share, reduce liquidity and mask companies' true compensation expenses. But none of this appears to have reduced the appeal of stock options in the minds of chief financial officers, according to this month's CFO Forum. Respondents indicate that a vast majority of U.S. companies, 80.5 percent, award options to employees, and that most of the grants go to senior and midlevel management. At more than 70 percent of the companies surveyed, options are concentrated in the hands of less than 10 percent of employees.