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Are Stock-Option Awards Still a Smart Idea?

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By David Beck
With executive-compensation plans under close scrutiny by both regulators and shareholders, it is no wonder that top management at some companies is re-evaluating the use of stock options.
But cutting back on options may not be in the best interests of many companies.
"Review long-term incentives in light of the negative attention that executive stock options have received," advises an "executive letter" by the Segal Group.
"But recognize that granting stock options in this market could motivate executives to produce significant value for shareholders," adds the New York-based consulting firm.
According to the Segal Group, pay plans should either reward performance that improves shareholder value relative to other firms in the same industry or measure performance against certain benchmarks.
Top management needs to determine whether current pay practices support growth objectives or strategies that take the company in new directions.
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