The Diet approved key changes to the relevant parts of the Commercial Code in mid-May. Companies now are allowed to buy or issue and hold shares to provide stock options to employees for up to 10 years. Indicating that the administration of Prime Minister Ryutaro Hashimoto puts a high priority on this subject, the rule changes went into effect June 1 rather than sometime in the spring of 1998, as originally expected. In the two months since then, approximately 36 companies have announced or approved stock option plans. Other companies have decided to be more generous than Toyota, offering stock options or warrants to all managers or, in a few cases, to every employee.
Observers cite some problems with the first generation of stock option plans.
The period when the options can be exercised is comparatively short. Companies like Toyota argue that they have to set such a short period because their executives tend to retire roughly this many years after reaching the level of director. Critics also say that the required share price increases are too small to really act as an incentive. According to the Nikko Securities poll, three-quarters of current stock option plans require a share price rise of at least 5 percent before the options can be exercised. Business analysts argue that triggers like these are so limited that managers may not need to take any extraordinary action to achieve them, defeating the goal of using options to encourage executives to shake things up and boost the bottom line.