What is the basic idea behind the stock option plan in relation to the value of the company's stock?
A) The executives can be held accountable for the decrease in value of the stock.
B) The executives are guaranteed participation in the board meetings.
C) The executives will strive to increase organizational performance.
D) The company can hold on to the executives for as long as it is necessary.

Question

Quizplus · Accepted Answer

The basic idea behind the stock option plan is to align the interests of executives with those of shareholders. By offering stock options to executives, they have a financial incentive to work to increase the value of the company's stock. This in turn should lead to better organizational performance, which benefits both shareholders and executives. Options also provide a way for companies to retain executives for longer periods of time, as they have a vested interest in the company's success. Option plans can be structured in various ways, but the common goal is to create a win-win situation for both the company and the executives.

What Is the Basic Idea Behind the Stock Option Plan