It also uses them to decrease the turnover of the human capital in the organization.
An analysis of the organization’s stock options policy reveals information that is promising for investors and the concerned stakeholders. The organization has been using stock options as a large part of their compensation at the executive level. Employees after meeting the criteria set by the organization are allowed to own options and exercise them over a period of 10 years. ESO allows the employees to hold stock options below the market price. The sound corporate governance policy requires that the board meeting and the shareholder’s meeting can decide upon the re-pricing of the options and this cannot take place without the approval of the concerned. The company has been able to decrease the moral hazard relating to the issue of stock options and has provided huge incentives to its employees apart from cash compensation. The morale of the employees is all time high due to the compensation package that they are offered. The company is looking forward to striking major deals and re-establishing its name as a bio-pharmaceutical in the world.
ESO carry a moral hazard with them, if properly implemented, with sound accounting policies implemented throughout the organization; it is bound to create success for the organization and its employees. Disclosure of proper information increases accountability on the part of management and restricts them from any incorrect actions that they might take. They can be used to decrease moral hazard, increase employee motivation and increase market efficiencies. BMS, with the help of sound corporate governance policies has effectively handled to issue of stock options, taking all the advantages that they possibly can. 16
The paper is organized to provide a basic understanding of how the Employee Stock Option (ESO) works in a Bristol Myers Squibb