In the U.S.,tax advantages exist to compensating good performance by large-firm CEOs with stock option grants rather than by simply increasing salaries.

Question

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Stock option grants are often tax-deductible for the company and may benefit the CEO in the form of capital gains tax rates rather than higher income tax rates on a larger salary. Therefore, tax advantages exist for using stock options as a form of compensation for top executives in large firms in the United States.

In the US,Tax Advantages Exist to Compensating Good Performance by Large-Firm CEOs