Answer to Question #6206 in Economics of Enterprise for LaMarcus Streeter

Question

Use the Internet to research a company in which you are interested and review their financial statements, with a focus on how the company is currently using options.

Based on what you discovered, determine the best way the company you research could leverage stock options to offset employee compensation. Explain your rationale.

Answer 1

Stock options provide the employee the ability to purchase shares of the stock at a set price, regardless of the market price, within a certain period. PepsiCo offers its employees stock options at an amount equal to 10% of base salary. Employees share the victories and defeats of the company when the price of the stock market going up or down. Balance work and personal life focuses on the benefits and strategy that is oriented on the reliability of payment eliminates those components that are associated with the risk not to receive compensation in the event that for whatever reasons, the company will not receive the expected returns, or if the stock market falls prices for the company. Stock-based compensation expense was $352 million in 2010, $227 million in 2009 and $238 million in 2008. At year-end 2010,
154 million shares were available for future stock-based compensation grants.
Experts believe that turning employees into shareholders increases their loyalty
to the company and leads to improved performance.