Based on the most recently filed stockholder proxy statements, the 50 CEOs had options to acquire nearly 14 million shares of their company stock. This is approximately 7.5 times the annual base salaries for the 50 CEOs. To answer that question, companies need to consider the following critical issues. Each organization needs to be clear on the specific objectives for their company. There are a variety of tools available that make rewards contingent on a company's stock price.
Stock options are, by far, the most popular tool.
Forty-eight of the top 50 CEOs participate in stock option programs. If the price of the company's stock rises above the exercise price, the holder realizes gains equal to the difference between the exercise price and the current fair market value. Because the company loses a tax deduction at the time of exercise with ISOs, these awards are more costly and many companies have relied on NQSOs. However, with the meaningful reductions in capital gains rates included in the new federal budget, ISOs should quickly return to full popularity. There are numerous variations in the design structure of option programs.