Accounting for Stock Options.

Stock options are a form of compensation granted to an employee, by an employer, in lieu of salary and wages. Stock options grant employees the right to purchase a certain number of shares at a given price . Traditionally, firms have compensated their employees through some combination of salaries, commissions, or bonuses. Less prevalent was compensation tied to firm's performance, such as stock and/or stock options. Historically, performance-based compensation was designed for corporate executives and …

…own options- actions not focused on growth in long term shareholder wealth. Management should review their company's stock ownership plans with an eye towards increasing equity incentive plans available to their employees, whether options, restricted stock grants or employee stock purchase plans - in order to develop a mix of incentives that will likely result in improved productivity and profitability for the company, its executives, employees and shareholders in the short and the long term!