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GRADUATE SCHOOL OF MANAGEMENT. ZACHARIAS SAUTNER , University of Oxford, SaidBusiness School, December 12 , 200 5 1 0:45 - 1 2:0 0 Seminar GSM Building Room : 1073 Subject: “ Corporate Governance and the Design of Stock Option Programs ” ABSTRACT
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GRADUATE SCHOOL OF MANAGEMENT • ZACHARIAS SAUTNER, • University of Oxford, • SaidBusiness School, • December 12,2005 • 10:45 - 12:00 Seminar • GSM Building Room : 1073 • Subject:“Corporate Governance and the Design of Stock Option Programs” • ABSTRACT • Investors and academics increasingly criticize that features of employee stock option (ESO) programs reflect rent-extraction by managers (managerial power view). We use a unique European dataset to investigate the relationship between the design of ESO programs and corporate governancestructures. We find that ownership structures are related to the ESO design in a way that is consistent with the managerial power hypothesis: when ownership concentration is low and the expositionto the U.S. capital market is little, executives extract rents by designing poor ESO plans. Moreover, firms with weak creditor rights more often have badly designed option plans. Our findings also suggestthat ineffective board structures (insider-dominated boards) are related to ESO design in a way thatsupports the arguments of the self-dealing view. YBF
