Stock Option

A non-tradeable call option giving an employee at a publicly-traded company the right to buy shares in that company for a certain price. Stock options in this sense are often a part of compensation for major and mid-level executives in large publicly-traded companies. If the share price for the company increases, stock options can be very profitable for the employee. These stock options have certain rules governing when and how the option can be exercised.

employee stock option

See incentive stock option.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Employee Stock Option

An option granted to an employee to purchase the employer's stock. Employee stock options to which special income tax treatment is accorded are known as statutory options.

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References in periodicals archive

The authors hope that FASB will reconsider the exercise date intrinsic method, thus rendering the accounting for the cost of employee stock options much less complex and much more accurate.

Accounting for employee stock options: examining another option

Commencing in 2011, corporations and mutual fund trusts that provide employee stock options will not be entitled to rely on various statements made by the CRA suggesting that withholding in respect of stock options may not be required or may be reduced.

Department of Finance Releases Draft Legislative Proposals Amending Stock Option Rules - Option Plan Amendments May Be Required Prior to 2011

While comparing the outcomes of panels A and B, though the agency theory is supported in both panels, the results are more favorable for the sorting and retention model in case of employee stock option plans.

Beginning of stock option-based compensation in Japan : a test of alternative theories

Even though most employee stock options are granted at-the-money and so have zero intrinsic value (that is, market price minus exercise price), they have positive value at the grant date because of the volatility value of the option.

Regulatory rules and estimating economic growth: two perspectives on expensing employee stock options (1)

It generally assigns a higher value to options issued at a higher price, which isn't reflective of the employee stock options value.

Are stock options good business options? When considering whether to use them or not, consider all the angles. (Management Trends)

The key distinction is that in all estimations, [[alpha].sub.2], the coefficient on employee stock option expense (ESOEXP) is not significantly positive (in fact, it is negative in 1996).

The valuation implications of employee stock option accounting for profitable computer software firms

They construct a sample of employee stock option plans for 125 S&P 500 firms from 1994 to 1998.

The effect of employee stock options on the evolution of compensation in the 1990s

Companies must consider their unique circumstances when deciding whether or not to reprice employee stock options.

Underwater stock compensation: what options do employers have?

Nevertheless, it is still possible for accounting theorists to argue that an employee stock option has some value--i.e., its value is not zero--and good accounting practice should recognize a value of some kind, if only to vindicate the traditional accounting concept of conservatism.

A troubling requirement: why should the FASB require the expensing of options if it has no idea how it should be done?

The contract - which covers about 10,000 workers - reportedly includes wage increases, an employee stock option plan and premium pay for bilingual reservation agents.

Southwest Airlines ratifies contract with reservation and customer service agents