Executive stock options are issued with the hope that the recipients will:
A) sell the shares they currently own thereby diversifying the firm's ownership.
B) work to increase the value of the firm's stock.
C) never exercise them.
D) sell their shares at the option's exercise price.

Question

Quizplus · Accepted Answer

Executive stock options are typically part of a compensation package designed to incentivize executives to work towards increasing the value of the firm's stock. By tying their compensation to the performance of the company, executives are motivated to make decisions that will benefit the firm and its shareholders. Option holders may choose to exercise their options and sell the resulting shares at a profit, but the primary objective is typically to motivate value-creating behavior.

Executive Stock Options Are Issued with the Hope That the Recipients