You Can't Take it with You: Sunset Provisions for Equity Compensation When Managers Retire, Resign, or Die
40 Pages Posted: 13 Nov 2008
There are 2 versions of this paper
You Can't Take it With You: Sunset Provisions for Equity Compensation when Managers Retire, Resign, or Die
Date Written: December 2007
Abstract
Company stock option plans have diverse â¬Ssunsetâ¬? policies for modifying terms of options held by managers who exit the firm. In our S&P 500 sample, these forfeiture, vesting, and expiration provisions are less generous in companies characterized by fast growth, dependence on skilled human capital, and high strategic interaction with competitors. While these results apply forworkers who retire at the end of their careers, almost no variation exists in the treatment of workers who resign with the possibility of working elsewhere. We show that these features of firmsâ¬" option plans directly impact management turnover. For CEOs over age 60, companiesâ¬" sunset rules imply large discounts to option award values and estimates of total compensation. The authors appreciate helpful comments from Manuel Ammann, Patrick Bolton, Jennifer Carpenter, Don Chance, Stephen Choi, John Core, Joan Heminway, Tracie Woidtke, and seminarparticipants at Chinese University Hong Kong, Fordham University, Georgetown University,Mannheim University, University of St. Gallen, University of Tennessee, and the Gerzensee European Summer Symposium in Financial Markets.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
The Use of Equity Grants to Manage Optimal Equity Incentive Levels
By John E. Core and Wayne R. Guay
-
The Other Side of the Tradeoff: the Impact of Risk on Executive Compensation
-
Stock Options for Undiversified Executives
By Brian J. Hall and Kevin J. Murphy