Governance and the Split of Options between Executive and Non-Executive Employees

40 Pages Posted: 11 Apr 2005

See all articles by Wayne R. Landsman

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Mark H. Lang

University of North Carolina at Chapel Hill

Shu Yeh

National Taiwan University - Department of Accounting

Date Written: March 2005

Abstract

We examine the determinants and consequences of the split of options between executive and non-executive employees. We find that the proportion of options granted to executives is lower the stronger is firm governance. For the sample as a whole, the relation between options and both operating income and valuation is weaker for executive options than for options to lower-level employees. Splitting the sample between weak and strong governance firms, for the weak (strong) governance firms, the relation between executive options and firm performance and valuation is weaker (stronger) relative to non-executive options. Results are robust to controls for the endogeneity of option granting choice. Taken as a whole, our results suggest that firms with relatively weak governance tend to give a larger proportion of options to executives and appear to receive relatively less benefit from those options.

Keywords: Employee Stock Options, Executive Stock Options, Broad-Based Options, Governance

JEL Classification: G30, G34, J33, M41

Suggested Citation

Landsman, Wayne R. and Lang, Mark H. and Yeh, Shu, Governance and the Split of Options between Executive and Non-Executive Employees (March 2005). Available at SSRN: https://ssrn.com/abstract=688083 or http://dx.doi.org/10.2139/ssrn.688083

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Mark H. Lang (Contact Author)

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Shu Yeh

National Taiwan University - Department of Accounting ( email )

50 Lane 144, Section 4
Taipei 32026
Taiwan

Register to save articles to
your library

Register

Paper statistics

Downloads
287
rank
103,432
Abstract Views
1,803
PlumX Metrics