COMM 122 Lecture Notes - Lecture 3: Employee Stock Option, Myron Scholes, Risk-Free Interest Rate
15 May 2017
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You have just been hired as a financial analyst by moonlight inc. , a mid-sized ontario company that specializes in creating exotic clothing. The hiring committee (not all of them know much about employee stock options (eso)) has given you the task to make recommendations on the compensation package to be offered to an incoming senior executive. One of the major concerns is about granting employee stock options in the compensation package. Some members of the compensation committee are worried that such a grant will create incentives to maximize short-term profits at the expense of long-term growth. Other members are concerned that granting employee stock options may dilute current shareholders" ownership stakes in the company. Along with a base salary, the executive will receive options with a strike price of for 10,000 shares of company stock and a vesting period of 2 years.
