Corporate Governance

[Ernest Seow]

Dear all,
Can exlpain why the following is a cause for cocern for the board of directiors’ remuneration committee:

• Management of company re-price stock options downwards

Thank you!
Cheers,
Ernest

 

[CFAStart2014]

Isn’t that one of the ways that management can manipulate the financial performance of the company?

 

[busprof]

I think the logic is more that they’ve effectively bestowed additional compensation on the execs (remember - the value of a call option increases when the strike is lowered).
In academia, there’s conflicting evidence on whether repricing is bad or good. One argument in favor of it is that that by setting the options closer to being in the money, they better align management’s incentives w/ shareholders. But the CFAI perspective is that this is bad, so that’s the one to remember.

 

[Gebura]

On the topic of Corporative Governance can somebody please explain me why finder’s fees are bad thing? What’s wrong in finding a target company for aquisition and receiving an incentive for that?