Optional extra?

Jul 29 2010 by Brian Amble Print This Article

During the dot com boom, tech companies showered share options on their staff like confetti, hoping that the lure of untold riches when today start-up became tomorrow's next Google would galvanise them to perform better.

But while the effectiveness of stock options has became something of an article of faith in the tech sector, is there any evidence to back this up?

According to a new study by US academics, the answer depends on who is receiving the options.

The study, "Employee Stock Options and Future Firm Performance: Evidence from Option Repricings," found that options are enough of an incentive for executives that they can improve a firm's overall performance. But for non-executive employees, they provide no incentive at all.