The approach, they noted, ensures that I. Those companies have chosen to give their executives outright shares -- rather than options to buy shares -- if the company meets certain performance goals, which can include sales, cash flow, customer satisfaction and stock performance compared with the market or companies in similar industries.
Both kinds of programs, analysts say, are efforts to link the incentives of corporate management more closely to their performance and to give them greater reasons to act in the long-term interest of shareholders.
In the 's, the generous use of stock options as compensation, analysts say, allowed many executives to get rich simply because the stock market soared, not because of their performance as outstanding managers. McGurn, senior vice president of Institutional Shareholder Services, which advises large shareholders. The premium-priced options program applies to Samuel J. The company will continue to allow executives to acquire a limited number of stock options pegged to the market price, but only if they buy some I.
In the worst cases, like Enron and WorldCom, the excessive use of options seemed to provide an incentive for executives to manipulate quarterly earnings, and then cash out their options at a favorable price, with little regard for the long-term welfare of the company.
In the 's, under Mr. Palmisano's predecessor, Louis V. Gerstner's critics did not suggest that he was cashing out his shares. Nor has there been any doubt about the turnaround under Mr.
Gerstner or the health of the company he passed onto Mr. Palmisano, who became chief executive in March View all New York Times newsletters. More stringent rules for accounting for stock options is another post's reform that is being pressed on corporate America.
The Financial Accounting Standards Board has not yet taken a final stand, but it is expected to require that the cost of options must be deducted from profits, at least in part, as an expense. Premium-priced options have been used by American companies, but only on a limited basis and usually as part of a pay package for a coveted executive, giving the person an incentive to increase a company's share price over the long term.
Still, it remains unclear how significant the move will be. The options vest over four years, and the options that will be granted under the program in the next couple of months will not expire for a decade. Under prodding from the German corporate governance council, a private but influential group, some big German companies, like SAP and Siemens, adopted premium-priced options programs last year.
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