An Analysis Of Efficiency Of Executive Stock Option System

Executive Stock Option is a system of urging managers onward, which was applied in companies widely in abroad. Executive Stock Option with many exclusive advantages was effective in practice, even though there are different opinions about the efficiency of ESO system.Executive Stock Option is not applicable to every company, which can't solve the incentive problem. It's application is based upon many conditions and have relation to many factors, e.g. legal factor, market factor, intermediary in organization, internal management of company, manager's character, the design of stock option, and so on. It's only effective in certain range.This paper put forward some effective conditions of employment of the executive stock option system firstly. Then analyzes kinds of effect of executive stock option system, e.g. incentive effect, moral hazard effect, cost effect, managing-risk effect, and so on. Which show that these effects influence executive stock option on different aspects and directions: some improve the efficiency of executive stock option, other restrain it. So when implementing the executive stock option system, company need consider comprehensive facts. With effective external conditions and proper scheme, the ESO system is efficient So ESO system could be implement in some companies. Finally, there give a conclusion of the essay.