Stock option programmes as a value orientated management instrument

Seminar paper from the year 2004 in the subject Business economics - Business Management, Corporate Governance, grade: 1,3 (A-), Anhalt University of Applied Sciences (Master of Business Adminstration (HS-Anhalt)), course: Finance and Policy, language: English, abstract: Stock option programs (SOP) are known as a salary instrument for executives in companies. They are established in the United States and became popular in recent years also in Europe. This paper is concentrated on the use of stock option programs in German companies. Also it isonly concentrated on stock option programs for the management as an incentive to increase thecompany performance. Stock option programs for employees became more common in the lastyear, but they are not part of this paper. Chapter 2 gives a definition of the agency theory and why incentives for the management arenecessary. An overview over stock option programs is also given. Both definitions are essentialfor the rest of the analysis. Chapter 3 explains detailed the advantages and disadvantages of the stock option programs. Itshows theory and what modifications are possible in the reality. Examples from differentcompanies like Daimler-Chrysler, SAP AG and Google Incorporation. are included to support. Taxadvantages through SOP and accounting rules that are connected with SOP are not part of thispaper, because the focus is to show how the stock options program can be used as an incentiveinstrument for the management to increase the shareholder value. Chapter 4 describes an optimal model for SOP as far as it is possible to develop a program that isappropriate for different companies. In chapter 5 it is examined on the basis of the results of chapter 3 and 4 how appropriate theSOP of the company SAP AG is. Chapter 6 summaries the work and gives an outlook for the future development.