Employee Stock Option Question...?

Question

Employee stock options are intended to serve as reward and motivation. What is the consequence if the option granted is out of the money? What should a company do about out-of-the-money stock options?

Answer 1

The obvious financial consequence is that the option is worthless to the employee, making them unhappy about them not panning out. I don't think that is the thrust of your question, however.

If you mean how should it go into the financial statements, that is a question you should be asking the company accountants.

If you are talking about ethically or in a retention/making employees happy way, the obvious thing would be to throw in some cash, but if the options are out of the money, I doubt the company is in a position to do such.

Answer 2

Are you talking about Stock Appreciation Rights? Some companies award those and out-of-the-money options as incentives for employees to stay at the company in hopes of stock prices appreciating in the future.

Answer 3

you're given the the appropriate option to purchase various enterprise shares at a sequence fee. Say 1000 shares at $10.00 a proportion. the alternative is sweet for a sequence era. in case you do no longer exercising them interior of that factor physique you loose them. Say the industry fee of the shares is going to $15.00 a proportion. You exercising the alternative on the $10.00 fee, turn around and right now sell them for $15.00 and make $5.00 a proportion or $5,000.00. generally you become vested interior the shares over a volume of time. Say a million/3 in a year a million/3 in 2 years and a million/3 in 3 years. in case you bypass away your interest you retain any vested thoughts you have.. you may desire to pay tax on any income you're making. If the industry fee on no account is going above the alternative fee you do no longer something.