Do Options Really Motivate?

from the maybe-not dept

With the continuing argument over whether or not stock options should be expensed, Business 2.0 is bringing up a different (and perhaps more important) question: do stock options really motivate employees? The answer in the article is not at all - though, I question some of the reasoning. Basically, the author looks at some studies that show the aggregate results of companies that use stock options. Within any set of aggregate results, it's very easy to lose sight of the really important statistics - since both good and bad findings are merged together in a way that will cancel each other out. Secondly, the author assumes that just because companies that offered stock options didn't do well, they didn't "motivate" employees properly. The fact is, employees can be the most motivated employees in the world - but if the product has no market it's not going to matter. Finally, the article jumps back and forth between stock options for employees and stock options for senior management - as if they're the same thing. The fact is, these are very different in that senior management has the ability to singlehandedly make changes that directly impact their options immediately - and thus, senior management stock options probably should be treated differently. Clearly, there are problems with the way stock options are currently treated. However, this article is simplifying the case way too much, and throwing the baby (and perhaps the whole tub) out with the bathwater.