The risk of employee stock options - the case of polish companies
The risk of employee stock options - the case of polish companies
Sunday, October 11, 2015: 11:15 AM
Employee stock options (ESO)are an instrument with a short history in the Polish capital market. The practice of granting stock options was started in the lste 1990s. In Poland ESO plans are predominantly established by large companies quoted on the regular stock exchange and are generally limited to top executives. Although they are not aimed specifically at particular types of company, they are more widely used in the IT sector (approximettly 11 percent of programs in Poland). The situation is similar in the US and other European countries (e.g. in Germany, Belgium, Finland).
The analysis of companies listed on the Warsaw Stock Exchange (WSE) [Majewska 2013] shows that only some of the corporations operating in Poland have adopted options as a tool to build proper incentive schemes. There are some inefficiencies generated by them. The aim of this article is to examine the risk of ESO programs which were implemented by companies listed on the Warsaw Stock Exchange. The risk is associated with the lack of realization of the goal set by the ESOs plans. Most companies define it as part of an optimal incentive arrangement which can increase the value of the company.
The risk is connected with few elements of the ESO. In particular, they relate to a vesting period, vesting criteria, an exercise price, the time available for exercising the options and employees entitled to receive options. The paper analyzes those parameters and their influence on the behavior of program participants in relation to the performance of the company.
The range of the study is limited to WSE listed companies. The data include those companies that revealed information concerning their incentive programs in 1999-2014. The data come from annual reports, current reports, supervisory boards’ resolutions and press announcements.
The analysis of companies listed on the Warsaw Stock Exchange (WSE) [Majewska 2013] shows that only some of the corporations operating in Poland have adopted options as a tool to build proper incentive schemes. There are some inefficiencies generated by them. The aim of this article is to examine the risk of ESO programs which were implemented by companies listed on the Warsaw Stock Exchange. The risk is associated with the lack of realization of the goal set by the ESOs plans. Most companies define it as part of an optimal incentive arrangement which can increase the value of the company.
The risk is connected with few elements of the ESO. In particular, they relate to a vesting period, vesting criteria, an exercise price, the time available for exercising the options and employees entitled to receive options. The paper analyzes those parameters and their influence on the behavior of program participants in relation to the performance of the company.
The range of the study is limited to WSE listed companies. The data include those companies that revealed information concerning their incentive programs in 1999-2014. The data come from annual reports, current reports, supervisory boards’ resolutions and press announcements.