Benefits of Stock Options Over Other Compensation Methods

Subject: Finance
Pages: 1
Words: 273
Reading time:
< 1 min

The stock option has numerous benefits over and above the other compensations, and many such companies can succeed by adopting such a plan. The following are the key benefits of using the employee stock option plan. The management is able to appreciate their responsibility as part of the company shareholders, and hence they will put in more effort in growing the business. As the company grows and achieves the desired levels of profitability, the employees will be able to benefit from dividends and capital gains which can be higher than their annual pay packages. In this sense, the stock option plan has the ability to provide higher benefits to the employees.

The stock option plans are able to meet the investment goals of the managers, and hence they will be able to concentrate on their managerial roles as they achieve long-term investment benefits from the company stock. The stock option plan also provides some tax benefits to the management and the company staff, and as such, they are exempted from paying taxes on shares they own until they are disposed of. This will therefore reduce the financial burden that is associated with normal benefits. The employees who decide to exercise the option will normally benefit from higher capital gains as such options are normally provided below the market value of the stocks, and hence this can be a viable investment vehicle for the employees of the company. The employees can also benefit from savings opportunities that the stock option plan provides, as the shares are not as liquid as other compensation benefits.