Discussion Week 5 Question 1 Stock Options Chapter 8 Assignment

Discussion Week 5 Question 1 Stock Options Chapter 8 - Assignment Example Using Wal-Mart Company as an example, the company usually gives options to its employees. Each option covers a maximum of ten years from the time when it is granted. For those who at the time the option is granted own stock which represent 10% of the voting power in stock at the company, the term will not exceed five years. An employee can exercise an option when he gives notice to Wal-Mart and the company receives full payment for the option. An employee can exercise their option when their term ends as long as the option does not have restrictions. This can be done within sixty days. Options are transferable and are disposable to an immediate family; this is a â€Å"Permitted Transfer†. An option cannot is not transferable to another person other than through the â€Å"Permitted Transfer† or by the laws of distribution. The best way that the company can leverage stock options so as to offset employee compensation is by allowing employees to sell, transfer and dispose stock in the open market. This is because many employees see options as being part of their compensation and usually want to exercise them so as to get money. Restricting this to just family members is likely to make the options unattractive to employees. Employees should also be free to exercise the options at any time without following the process of notifying the company. This is because as they are in the process of notifying the company, they may miss out on making profits the moment that the stock prices go up in the stock