Options are granted to top corporate executives because:
A) executives will make better business decision in line with benefiting the shareholders.
B) executive pay is at risk and linked to firm performance.
C) options are tax-efficient and taxed only when they are exercised.
D) All of the choices are correct.

Question

Quizplus · Accepted Answer

Options are granted to top corporate executives for several reasons: they align executives' interests with those of shareholders by incentivizing executives to make decisions that increase share value (A), they link executive compensation to the performance of the company, adding an element of risk and reward to their pay structure (B), and they offer tax advantages, as options are taxed at the time of exercise, which can be planned for tax efficiency (C).

Options Are Granted to Top Corporate Executives Because