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Behavioral and Performance Consequences of U.S. Executive Equity Compensation and Ownership

Robert Grams ()

Working Papers from Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus)

Abstract: Logic and some empirical findings suggest that the consequences of the level of executive ownership and the size of stock option grants have non-monotic relations to firm performance. The size of option grants now typical in the U.S. is likely to encourage an excessive level of risk taking. Stock options are not an effective means of increasing executive ownership and are generally less efficient than full-value grants when comparing opportunity cost to the company and initial psychological value to the executive. Implications for research and compensation design are noted.

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