Purpose – This paper aims to develop a conceptual model that systematically interprets how key governance factors drive the alignment and the rent-extraction effects of executive stock options (SOs) as proxied by plan characteristics. Design/methodology/approach – The authors draw on the review of 202 articles published in international academic journals. They collect data from library databases and by hand-searching and citation-tracking relevant papers on the topic. Moreover, the authors review and classify the studies as related with determinants or proxies of alignment and rent-extraction effects of SOs. Findings – The conceptual model systematically interprets the results of the literature review and identifies the relationships between archetypes, driving factors and proxies of the rent/alignment effect of executive SOs. It highlights that, given ownership archetypes, effective (ineffective) governance practices drive the alignment (rent) aim of SOs as proxied by the optimal (non-optimal) plan design. Practical implications – This paper supports compensation committees in selecting the SO characteristics that better attract investors and retain executives. Moreover, it guides future policy making interventions aiming at mitigating the rent-extraction effect of SOs. Originality/value – The paper highlights that the governance determinants of SO aims can be effectively classified as archetypes or drivers of rent-extracting and aligning outcomes of these remuneration tools. Moreover, it offers a useful framework to guide future research efforts by providing a comprehensive interpretation of the relationships between ownership archetypes, driving factors and proxies of SO effects.

Alignment vs rent-extraction effects of stock options. A conceptual model

CATUOGNO, SIMONA;SAGGESE, SARA;SARTO, FABRIZIA
2016

Abstract

Purpose – This paper aims to develop a conceptual model that systematically interprets how key governance factors drive the alignment and the rent-extraction effects of executive stock options (SOs) as proxied by plan characteristics. Design/methodology/approach – The authors draw on the review of 202 articles published in international academic journals. They collect data from library databases and by hand-searching and citation-tracking relevant papers on the topic. Moreover, the authors review and classify the studies as related with determinants or proxies of alignment and rent-extraction effects of SOs. Findings – The conceptual model systematically interprets the results of the literature review and identifies the relationships between archetypes, driving factors and proxies of the rent/alignment effect of executive SOs. It highlights that, given ownership archetypes, effective (ineffective) governance practices drive the alignment (rent) aim of SOs as proxied by the optimal (non-optimal) plan design. Practical implications – This paper supports compensation committees in selecting the SO characteristics that better attract investors and retain executives. Moreover, it guides future policy making interventions aiming at mitigating the rent-extraction effect of SOs. Originality/value – The paper highlights that the governance determinants of SO aims can be effectively classified as archetypes or drivers of rent-extracting and aligning outcomes of these remuneration tools. Moreover, it offers a useful framework to guide future research efforts by providing a comprehensive interpretation of the relationships between ownership archetypes, driving factors and proxies of SO effects.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11588/649789
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