Interlocking Global Business Systems: The Restructuring of Industries, Economies and Capital Markets

By Edward B. Flowers; Thomas P. Chen et al. | Go to book overview
Stock options have been widely used in the United States as one component of their compensation packages. Corporate managers and employees who are awarded stock options can exercise the options to purchase a certain number of their firm's shares at a predetermined price during a specified period of time.Theoretically, stock options are used to reduce agency costs by aligning the interests of managers and shareholders. But in a practical sense as well, stock options are a good vehicle to preserve the balance between short- and long- term performance, since they focus on the firm's stock price. Stock options also are especially useful for start-up firms that may have difficulty finding the liquidity necessary to pay salaries and finance their investment opportunities. Stock options can be used to complement the relatively low salary of start-up firms and help them secure better labor forces. Considering this, the minister of labor affairs announced that the Office was preparing a program to help small- and medium-sized Korean firms use stock options.There are three important points in time related to stock options: grant date, exercise date and transaction date. On the grant date, the firm awards stock options to its employees. On the exercise date, employees exercise the option to obtain the firm's stocks if the market price is above the exercise price. On the transaction date, the employees sell the stocks obtained. At each point in time, accounting and tax issues are involved.For accounting and taxation purposes, stock options can be classified as incentive stock options (ISOs) and nonqualified stock options (NSOs). The ISO is favored by the federal income tax law. On the other hand, the NSO is not qualified for the preferential tax treatment. To be classified as an ISO plan, the following requirements must be satisfied (Harvard Business Case #9-386-090, 1985):
1. Stockholders must approve the plan within 12 months before or after its adoption. The plan should state the aggregate number of shares subject to the options and the employees who are entitled to receive them.
2. The options must be granted within ten years from the date the plan was adopted or approved by the stockholders, whichever is earlier.
3. The term of the option must not be longer than ten years.
4. The exercise price must not be less than the stock's fair market value at the time the option is granted.
5. The option, by its terms, must not be transferable except in the event of death.
6. The optionee, at the time the option is granted, may not own more than ten percent of the issuing company's combined voting power. This condition may be waived if the option price is equal to 110% of the stock's fair market value at the time the option is granted and the option term does not exceed five years.
7. The option must not be exercisable while there is a previously granted ISO outstanding.
8. The plan must limit the fair market value of stock for which an optionee may be granted options in any one year to $100,000 plus any unused limit carried over to such year. This unused limit carryover equals one-half of the excess of $100,000 over the fair market value of the stock for which the optionee was granted ISOs

-123-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Interlocking Global Business Systems: The Restructuring of Industries, Economies and Capital Markets
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 308

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.