Which statement is true of using stock options as incentive pay?
A) The use of stock options ensures that managers add value in terms of efficiency and customer satisfaction.
B) Stock options require an option holder to purchase the organization's stocks at its present market rate.
C) Stock options are rewarding for employees who exercise their option when the company's stock value has risen.
D) Low-level employees with stock options are more likely to think like owners than executives who have stock options.
E) A company's performance in the stock market tends to be significantly better if its low-level employees are provided stock options.

Question

Quizplus · Accepted Answer

Stock options are a form of incentive pay that allows employees to purchase the organization's stocks at a predetermined price, usually the current market rate. When the company's stock value rises, the employee can exercise their option and purchase the stock at the lower predetermined price, then sell it at the higher price, resulting in a profit. This incentivizes employees to work hard and make decisions that will benefit the company and increase stock value. Therefore, statement C is true.

Which Statement Is True of Using Stock Options as Incentive