The paper by Steven Huddart is an excellent synthesis of the research into the timing of the exercise of options. Two worrying features of the conclusions are that ‘early exercise is a pervasive phenomenon’ and that ‘exercise is strongly positively related to volatility’. The first of these findings does not fit well with one of the key justifications for executive option schemes, namely goal congruence; particularly if the goals of the corporation are other than short term.
KeywordsCorporate Governance Stock Option Option Scheme Executive Compensation Early Exercise
- Williams, A.P. (1994). Just Reward? The Truth About Top Executive Pay. Kogan Page, London.Google Scholar