Beyond the Basics , which is the next step beyond this book. For coverage of employee stock purchase plans, see Employee Stock Purchase Plans . The Stock Options Book is a comprehensive guide for companies and professional advisors who want to use employee stock options to attract, retain, and reward employees. Typically, the plan's structure, as well as its specific terms and conditions, will be determined in consultation with the company's legal counsel, accountants, and outside compensation or benefits specialists. Factors taken into consideration in designing the plan will include the cost to the company and to proposed participants, the potential liquidity for participants, and the income tax and financial accounting consequences arising from the operation of the plan.
Most plans allow for the grant of both nonqualified stock options and incentive stock options.
This permits flexibility in granting appropriate options to selected employees, while effectively limiting the total number of shares of stock available for granting under the stock option program. Generally, the company's legal counsel will prepare the plan documents. Once management has approved the stock option program, it will be presented to the company's board of directors for consideration and adoption. Because under the corporate laws of most states, the board has the responsibility for all issuances of the company's stock, board approval is generally required before the implementation of an employee stock option plan. Following adoption by the board of directors, an employee stock option plan is customarily submitted to the company's shareholders for approval.