Stock option programs (SOP) are known as a salary instrument for executives in companies.
They are established in the United States and became popular in recent years also in Europe.
This paper is concentrated on the use of stock option programs in German companies. Also it is
only concentrated on stock option programs for the management as an incentive to increase the
company performance. Stock option programs for employees became more common in the last
year, but they are not part of this paper.
Chapter 2 gives a definition of the agency theory and why incentives for the management are
necessary. An overview over stock option programs is also given. Both definitions are essential
for the rest of the analysis.
Chapter 3 explains detailed the advantages and disadvantages of the stock option programs. It
shows theory and what modifications are possible in the reality. Examples from different
companies like Daimler-Chrysler, SAP AG and Google Incorporation. are included to support. Tax
advantages through SOP and accounting rules that are connected with SOP are not part of this
paper, because the focus is to show how the stock options program can be used as an incentive
instrument for the management to increase the shareholder value.
Chapter 4 describes an optimal model for SOP as far as it is possible to develop a program that is
appropriate for different companies.
In chapter 5 it is examined on the basis of the results of chapter 3 and 4 how appropriate the
SOP of the company SAP AG is.
Chapter 6 summaries the work and gives an outlook for the future development.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Definitions
- Agency theory
- Details about stock option programs
- General idea
- Categorisation
- Analysis stock option programs
- Discussion
- Advantages of stock option programs
- War for talents
- Solution for the agency problem
- Stock option programs in young, fast growing companies
- Stock option programs and value creation
- Further advantages
- Critic on the common stock option programs
- Windfall profits
- Repricing
- Masking of costs of the program
- Wrong incentive
- Different time horizons
- Abuse
- Valuation of stock option programs
- Development of an optimal stock option program
- Examination of the stock option program from SAP AG
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper focuses on the use of stock option programs in German companies, specifically examining their effectiveness as an incentive for management to enhance company performance. The primary goal is to analyze the advantages and disadvantages of these programs in the German context.
- Agency theory and its relevance to executive compensation
- The role of stock option programs in mitigating agency problems
- The effectiveness of stock option programs as a tool for value creation
- Potential drawbacks and criticisms associated with stock option programs
- Developing an optimal stock option program model for different companies
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: Introduces the topic of stock option programs (SOP) and their increasing popularity in Europe, particularly in Germany. This chapter sets the context for the subsequent analysis of SOP as an incentive instrument for management to increase shareholder value.
- Definitions: This chapter provides definitions for two key concepts: agency theory and stock option programs. It explores the agency conflict between owners and executives and how stock options can be used to align their interests.
- Analysis stock option programs: This chapter delves into the advantages and disadvantages of stock option programs, providing theoretical insights and practical examples from companies such as Daimler-Chrysler, SAP AG, and Google. It explores the potential benefits of SOP for attracting talent, resolving agency issues, fostering value creation, and more.
- Development of an optimal stock option program: This chapter examines the possibility of developing a universally applicable model for SOP, considering the diverse needs and characteristics of different companies.
- Examination of the stock option program from SAP AG: Based on the insights gained in previous chapters, this chapter analyzes the stock option program implemented by SAP AG, evaluating its appropriateness and effectiveness.
Schlüsselwörter (Keywords)
Key terms and concepts explored in this paper include stock option programs (SOP), agency theory, shareholder value maximation (SVA), economic value added (EVA), management incentives, company performance, German corporate governance, and the specific example of SAP AG.
- Quote paper
- Armin Gruwe (Author), 2004, Stock option programmes as a value orientated management instrument, Munich, GRIN Verlag, https://www.grin.com/document/32781
