Indexed Stock Option

Indexed Stock Option

A stock option that may only be exercised if the company outperforms some stated index such as the S&P 500. This provides extra incentive for the employee (who is usually a senior executive) to see to it that the company performs well. Indexed stock options are favored by some ethical investment groups, as well as by some unions, because they reward performance for the company's work rather than the executive's ability to detect an advantageous moment in the market.
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Other shareholder proposals, all of which the company opposed, received the following affirmative votes: cumulative voting, 34 percent; additional director nominees, 10 percent; board composition, 23 percent; CEO compensation cap, 18 percent; indexed stock options, 21 percent; prohibition of stock options, 13 percent; and management consulting services by auditor, 20 percent.
4 million stock option charge taken in the second half of 1997 relates primarily to indexed stock options granted to senior management and other employees having exercise prices below the estimated fair market value of the Company's common stock.
8 million non-cash stock option compensation charge in the third quarter of 1997 relating to the indexed stock options granted to senior management and other employees, and stock options granted during the third quarter of 1997 having exercise prices below the estimated fair market value of the Common Stock.