17th Annual Student Research Conference
Business & Accountancy
A Comparative Study of Stock Option Grants and CEO Compensation
Brian D. Krupich♦
Dr. Jeff Romine and Dr. Jason Lin, Faculty Mentors
Stock options are a primary component of compensation in public corporations. They have become especially important in "new economy" firms characterized by low sales and high growth. This study examines the prevalence of stock option grants as a portion of compensation in the Software and Programming and Electric Utility industries for 2002. Option grants are valued using an employee stock option pricing model, accounting for the lack of trading ability. A regression is used to find determinants of the value of option grants. The determinants of CEO compensation was found using similar techniques. Total CEO compensation is salary, bonuses, option exercise gains, and the present value of options granted during the year. Our results confirm those of past studies. We see a relationship between financial performance and both option grants and executive pay. Sales was the most significant factor. Other significant factors in the study were leverage and market capitalization.
Keywords: Stock options, compensation, electric utilities, software
Topic(s):Accountancy
Presentation Type: Oral Paper
Session: 27-1
Location: OP 2113
Time: 2:15