Topic5-MalayMondal

9 6 conclusion

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Unformatted text preview: ........................................................ 9 6. Conclusion.....................................................................................................................................10 Appendix I: Problematic Issues of ESO .................................................................................................11 References ............................................................................................................................................12 List of Illustrations Table 1: Different ESO policies................................................................................................................7 Figure 2: Safeguarding both Lender and Shareholder Incentive by Debt Linked Compensation...........8 Figure 3: Cyclical Relation of Manager, Lender and Shareholder Incentive ...........................................8 Figure 5: Debt or (D + E) Linked Compensation Evaluation ....................................................................9 Figure 4: Equity Linked Compensation Evaluation .................................................................................1 2 | P a g e Is Debt Linked Employee Pay Options a Better Idea Than Stock Options? Executive Summary Financial crisis and collapse of large firms has raised the “big question” on the applicability of equity based compensation. In this context debt is now being considered as an alternate approach. To compare the applicability of the compensation schemes I have identified four parameters – i) performance based compensation, ii) incentive to the executive, iii) safeguarding shareholder interest and iv) safeguarding other stakeholder interest. Neither debt nor equity based compensation qualified for the first parameter. Both these two components are market driven and beyond the control of managers. Again in case of equity, managers are induced to take higher risk to make higher profit as they a...
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This document was uploaded on 01/14/2014.

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