I have written a tongue-in-cheek post about how men with a deeper voice have a higher propensity to take on risks and may thus not be the best choice to run a company. But there is a more serious side to this research that warrants mention. One of the perennial discussions about CEOs of large corporations is their compensation. These days, their compensation package is not just very high, but often dependent on either stock bonuses or stock options. The difference between the two is of course that a stock compensation scheme works both ways. If the share price of the company declines, the CEO’s stock package declines in value. This is also true for the stock option plan, but once the options are far out of the money, the CEO does not face any more downside. Instead, the CEO has an incentive to take on more risks with the company. If the gambit works, the share price of the company recovers and the value of the stock options multiplies. If it doesn’t the company gets into real trouble but for the CEO that usually means leaving the company with a nice golden parachute.
Are reckless CEOs born or made?
Are reckless CEOs born or made?
Are reckless CEOs born or made?
I have written a tongue-in-cheek post about how men with a deeper voice have a higher propensity to take on risks and may thus not be the best choice to run a company. But there is a more serious side to this research that warrants mention. One of the perennial discussions about CEOs of large corporations is their compensation. These days, their compensation package is not just very high, but often dependent on either stock bonuses or stock options. The difference between the two is of course that a stock compensation scheme works both ways. If the share price of the company declines, the CEO’s stock package declines in value. This is also true for the stock option plan, but once the options are far out of the money, the CEO does not face any more downside. Instead, the CEO has an incentive to take on more risks with the company. If the gambit works, the share price of the company recovers and the value of the stock options multiplies. If it doesn’t the company gets into real trouble but for the CEO that usually means leaving the company with a nice golden parachute.