首页
外语
计算机
考研
公务员
职业资格
财经
工程
司法
医学
专升本
自考
实用职业技能
登录
外语
Bengt Holmstrom, a professor at MIT, is slated to accept a Nobel Prize in economics next month for his path-breaking contributio
Bengt Holmstrom, a professor at MIT, is slated to accept a Nobel Prize in economics next month for his path-breaking contributio
admin
2018-01-01
63
问题
Bengt Holmstrom, a professor at MIT, is slated to accept a Nobel Prize in economics next month for his path-breaking contributions to contract theory. Congressmen and corporate boards might take note: Mr. Holmstrom’s innovative proposal for indexed stock options, which aren’t yet widely used, could be one solution in the political debate over whether CEOs are fairly paid for performance. Almost all stock options today have a fixed exercise price: The holder buys the company’s stock at the market price on the day the options were granted. The idea is to align the interests of CEOs and their shareholders. If the stock rises, the executive buys at the old price and makes a profit. If the company’s stock is flat or down, the options become worthless.
Unfortunately, as Mr. Holmstrom pointed out in 1979, fixed-price options can easily reward poorly performing executives during times of rising markets. Suppose a drug company grant 50,000 options to its CEO with an exercise price of $100 a share. If in three years the stock rises by 30%—to $130 a share—the CEO exercising his options would make a profit of $1.5 million. Sometimes this profit might reflect the outstanding work of the CEO. But suppose the stock prices of comparable drug companies rose by 60% on average during the same three years. Suddenly the CEO’s options look like a windfall instead of a reward for superior management.
The opposite can also happen. Suppose the stock of our CEO’s firm fell by 15% a share in three years, when comparable drug companies dropped by 30%. The CEO’s stock options would be worthless, even though he did a much better job than his peers of managing the decline in the industry. An indexed stock option eliminates these problems by doing away with the fixed exercise price. Instead, the CEO has the option to purchase stock at a price that rises or falls along with the share prices of comparable firms. The board would choose an appropriate industry stock index against which to measure the executive’s performance. For administrative feasibility, the exercise price of the indexed options could be adjusted no more than annually.
To take an example: If the industry index rose 10% by the end of one year, so would the exercise price of the CEO’s options, meaning that if the stock of the CEO’s firm increased by the same 10% that year, his options wouldn’t gain value. This is the way to avoid over-rewarding (or under-rewarding) executives. CEOs with true managerial skill, those who beat their industry averages, will be richly compensated. Those who don’t will not. So why have few companies awarded options structured this way? Historically, firms shunned indexed options because the variable price model would generate expenses on their income statements, while fixed-priced options did not. But that comparative disadvantage no longer exists; For roughly a decade, companies have also been required to record expenses for fixed price options.
More important, an indexed stock option is subject to onerous taxes. Regulators wanted to prevent companies from granting options with exercise prices below market—say, a $70 option on stock worth $100—thus giving their executives built-in profits. So there’s a special rule for any option whose exercise price drops below the stock’s market value on the grant date: the government immediately taxes these built-in profits, plus a 20% penalty. Indexed stock options weren’t the target, but they fail under that regulation. To encourage companies to adopt Mr. Holmstrom’s proposal, tax authorities should revise the rule to exempt indexed options.
A last factor is competition. Executives might say that indexed options are less valuable than fixed price ones, especially in rising markets. But there are other ways to bid for top CEO talent. Companies could grant them restricted shares, whose payoff depends on achieving specified revenue or earnings targets. Indexed options are designed to reward managerial skill instead of fortuitous movements of the stock market. The government should change the tax rules so that a performance-oriented company may choose to award them without penalty. It’s a good idea and you don’t have to take my word for it: Ask the Nobelist.
What are the possible disadvantages of the fixed-price options?
选项
答案
the purpose is to link the interests of CEOs with shareholders / but the possible consequences: it can "reward poorly performing executives" in rising markets / and when stock prices of comparable companies rose much higher during the same period, the options would become worthless + meaningless / "a windfall" to CEOs even they show superior management / CEO’s gain would depend much on fortune / chance/ accidental opportunities
解析
转载请注明原文地址:https://jikaoti.com/ti/zuCYFFFM
本试题收录于:
NAETI高级口译笔试题库外语翻译证书(NAETI)分类
0
NAETI高级口译笔试
外语翻译证书(NAETI)
相关试题推荐
当前,国际金融危机已从局部发展到全球,从发达国家传导到新兴市场国家,从金融领域扩散到实体经济领域,给世界各国经济发展和人民生活带来严重影响。值此关键时刻,我们在这里共同探讨维护国际金融稳定、促进世界经济增长的举措,具有十分重要的意义。//我们正在
下面你将听到一段题为“说聪明”的论述。聪明的人,智力发达、记忆和理解能力也强。聪明是好事,是财富,应好好利用,用于进步,用于获取知识,用于为祖国为人民做好事,为大家也为自己好。应该承认,人和人不一样,有的人就是聪明。周恩来就是一个聪明的人,早在年
地球大气层正在转暖,这种迹象日趋明显,这向人们提出了一个重大问题,即地球变暖在多大程度上应归咎于人类活动,又在多大程度上是自然原因造成的?气候变化科学家们正在寻求答案。经过对全球气候变化的全方位定期科学评估,科学家们断定全球气候受到了“显而易见的人为影响”
下面你将听到一段有关城市规划与环保的讲话。
Whoweretakenhostageinthereportedkidnapping?
Whoweretakenhostageinthereportedkidnapping?
TheChinaMedicalTeamwasdevotedtotrainingofficialsinRwandasothattheycouldhelppeoplepreventinfectiousdiseases.
Whatcanbeforecastifaneyeisseeninthecenterofastormbyvisiblesatelliteimagery?
Whatcanbeforecastifaneyeisseeninthecenterofastormbyvisiblesatelliteimagery?
鉴于悬浮(无多数席位政党)议会的可能,英镑与美元的比值下滑。至周五,英镑对/兑美元下跌1.7%,为一英镑兑换1.2735美元。疲软的英镑导致进口商品上涨,并减少了国内的需求。
随机试题
3年前张三的年龄是他女儿的17倍,3年后张三的年龄是他女儿的5倍,那么张三的女儿现在:
Huntedasthewildturkeyis,ithasdevelopedahighdegreeofingenuityinescapingfromitspursuers.Itappearstohavelear
北朝乐府民歌主要辑人郭茂倩《乐府诗集》中的()。
下图所示四单元的l、EA、EI相同,所以它们整体坐标系下的单元刚度矩阵也相同。()
A.Volkmann缺血性挛缩B.创伤性关节炎C.关节僵硬D.脂肪栓塞E.骨化性肌炎(损伤性骨化)石膏或夹板过紧会引起的并发症是
下列关于内部开发无形资产所发生支出的会计处理中,正确的有()。
对收入和财富分配的结果进行纠正,属于财政()职能的范畴。
人体不能缺乏少量的碘,缺了碘就会肿脖子,然而大量的碘对人来说却有毒,碘蒸气能够剧烈地刺激黏膜,会把人毒死,因此( )。
J.Martin指出,系统开发所建立的企业模型应具有若干特性,以下哪个不在其要求之列?
Pleasekeepinmindthatyourjobistohelpyourcustomersgetthemostoutoftheirpurchase.
最新回复
(
0
)