股票期权重新定价正面我赢反面你输.doc

本科毕业论文（设计）外 文 翻 译原文：Stock Option Repricing: Heads I Win, Tails You LoseIntroductionIn most publicly traded companies, stock options are a big part of executive compensation, favored as a way to bind the financial interests of executives with shareholders. Although the exercise price of these options is fixed at the time of grant, some companies reprice stock options when stock price drops below the exercise price. The recent downturn in stock markets has prompted many companies to jump on the repricing bandwagon ( Business Week, December11, 2000). Repricing occurs in two ways: (1) either the exercise price is lowered, or (2) the existing options are cancelled and fresh options with a lower exercise price are issued.Critics oppose repricing because managers stand to gain whether stock price goes up or down. This undermines the incentive effects of stock options by eliminating the financial punishment to executives whose mismanagement perhaps led to stock price decline in the first place. The ultimate irony is that repricing increases managerial compensation when managers ought to be fired for poor performance.Institutional investors view repricing as a symptom of managerial entrenchment caused by ineffective corporate governance and routinely use their voting power to block repricing proposals. They are opposed to repricing because each new share granted to employees dilutes the control and returns of existing stockholders.Board of directors of repricing firms defend the practice by arguing that options far out-of-money are devoid of any motivational power, and repricing can restore managerial incentives. Another explanation, prevalent in Silicon Valley, is that repricing is necessary to retain talented employees who would be otherwise lured by rival firms. These firms grant employees stock options to conserve cash and view repricing as necessary to preserve their most valuable asset human capital. An implicit assumption is that retaining these executives is essential to business survival and improved firm performance.SuggestionsTheoretical literature suggests that repricing can be an effective antidote to the problems of low employee morale and high turnover especially in firms where intellectual capital is the most important asset. However, due to weaknesses in corporate governance and dysfunctional incentives under the current regulatory regime, repricing has lost its purpose and resulted in undesirable outcomes. To mitigate the side-effects of repricing, we offer the following suggestions: (1) educate public about the true economic costs of stock options, (2) promote regulatory changes, (3) strengthen corporate governance, and (4) revise CEO compensation plans.1. Educate public about the true economic costs of stock optionsMany corporate boards perceive repricing as a low cost option because repricing does not require companies to record an accounting charge and there is no cash outflow. The only cost is equity dilution when options are exercised. The dilution effect can be easily offset by share repurchases. It is little wonder that the boards tend to reprice when stock prices fall.Some politicians have repeatedly made statements that employee stock options have no value if the strike price is equal to the market price on the grant date. Their statements reflect either a tremendous lack of knowledge about accounting or considerable intent to deceive. Yet, the claim that stock options have no value at the grant date seems to be widely held both within the business community and the general public.Ex ante economic cost of an option is the amount of money an outside investor would pay if the company decides to sell such options rather than giving them to executives. Ex post economic cost of the option is the difference between strike price and the market price on the date options are exercised. Accounting and finance academics can play a useful role in educating executives, directors, politicians, and the general public about the true economic costs of options. They can help corporate boards, human resource managers, and executives understand how option valuation formulas such as Black-Scholes or Binomial models work so that those involved in designing the compensation mix realize that both stock option grants and repricing existing options are costly to the company. An increase in the awareness about the true economic costs of options will also exert pressure on policy makers to change the accounting or tax regulations to make such costs explicit and ensure that repricing firms bear these costs.2. Promote regulatory changesTwo most critical regulatory reforms needed are (1) to ensure that the cost of options is recognized explicitly in the financial statements, and (2) that there is symmetry between accounting and tax treatments. Financial economists agree that stock options are costly. In a recent testimony to U.S. Senate Finance Committee, Federal Reserve Bank Chairman Alan Greenspan described the severe market distortions from not showing the cost of options in financial statements. In the same hearings, Nobel Laureate Professor Joseph Stiglitz talked about the misinformation in the markets and advocated that stock option costs be recognized as an expense since reasonable estimates of values are available. When options are exercised in the future, the actual cost, which is the difference between the market price and exercise price, can be determined and any discrepancy between the estimated cost at the time of grant and actual costs can be adjusted against income. If the options are not exercised, the estimated stock option cost can be reversed. This will discourage the counterproductive behavior of giving out excess options as if they were free and encourage companies to provide executives with the right kind of incentives such as the theoretically superior indexed-options.The distinction between fixed and variable price options is absurd and so is the perpetuation of repricing by the “six and one” tactic allowed under I44. Changes in the tax code are also needed to ensure symmetry between accounting and tax treatments. Specifically, if companies deduct NQOs from taxable income, they should also be required to charge it against reported income.3. Strengthen corporate governanceOne obvious way to curb abusive repricing is to strengthen corporate governance. In principle, it involves implementing the model of separation of duties. Based on the discussion , some of the action steps that can be taken are: (1) appoint a non-executive director as chairman of board, (2) appoint outside and independent directors on board compensation committees, (3) seek shareholder approval for any repricing, (4) encourage institutional ownership or block ownership to monitor managers decisions on a continuing basis.4. Revise CEO compensation plansEven though routine repricing has become more painful under the new accounting rule, the continuing slide in stock market requires that boards respond with appropriate compensation tools. We recommend the following changes in compensation plan to retain and motivate key employees.Increase equity grants. If making managers owners aligns their incentives with stockholders and mitigates agency problems, firms can grant stocks rather than options to CEOs to achieve the same purpose. A steep decline in stock price can make options go underwater. Since top managers place little value on such options, they do not provide much incentive to them (Halland Murphy, 2000). On the other hand, stocks continue to be valuable even in down market. Moreover, whereas stock options enable managers to benefit alongside stockholders in up markets, while avoiding the wealth loss in down markets, equity ownership ties managers fortune with stockholders in both up and down markets. Therefore, granting stocks seems to be a better alternative than granting stock options.Index stock options. One important drawback of traditional fixed-price options is that the executive is punished (rewarded) when stock price declines (rises) due to exogenous market or industry factors. This violates an important doctrine of contracting theory that managers should be shielded from the uncertainty generated by factors outside their control. Repricing makes it worse because it weakens incentives to increase stock price while strengthening the incentives to increase volatility.Index options can be used to mute the undesirable effects of fixed-price option plans while preserving the incentives to increase shareholder wealth. This is achieved by replacing the fixed strike price with a moving benchmark, typically an industry or market index. Index options pay off only if the firms stock price exceeds the benchmark. They can still result in a positive payoff even when fixed-price options go underwater in a bear market. Thus, the use of index options renders repricing unnecessary. Conversely, index options can have zero pay off if the stock price increases solely due to market factors. This would address the popular criticism that options unfairly reward executives in a bull market (Business Week, April 20, 1998). Theoretically, by filtering out the performance of benchmark, index options provide more efficient incentive contracts. Executives are insured against common uncertainties outside their control. Therefore they demand lower risk premium and the firm saves on compensation costs.Johnson and Tian (2000a, b) analytically compare five variations of traditional fixed stock options, all of which have been used in practice: performance options, premium options, purchased options, reload options and indexed options. They find that compared to all other options, indexed options have a higher incentive intensity (measured by the sensitivity of option pay-off to stock price movements) and encourage risk- averse executives to take on risky projects. They have a low sensitivity to time to expiration. Since an important purpose of granting options is to reward managers for actions that do not translate into increase in firm value in the near future, indexed-options enable firms to write longer-maturity options without increasing compensation. The only drawback of indexed options is that compared to fixed-price options, they have a much lower probability of finishing in the money, and a corresponding lower value to the executive. Therefore, if a firm wants to substitute traditional options, it has to issue a larger number of indexed-options to preserve the existing compensation level.The idea of indexed options is not new. As far back as seven years, Akhigbe et al. (1996) advocated use of indexed options. Although some companies like Level 3, a telecom company, have used them, indexed options are not used widely despite their overwhelming theoretical superiority. One deterrent is current accounting rules that require variable accounting for stock options, which forces companies to expense changes in their value each quarter and face the prospect of increased earnings volatility.Reprice value-for-value. Simply lowering the strike price of existing options to the prevailing market price substantially increases the probability of finishing in-the-money and hence the value of options. The result is a windfall gain to the executive who perhaps ought to be fired for poor performance. An alternative is to cancel old options and replace them with fewer options of lower strike price and/or shorter maturity so such that the value of new options equals the value of cancelled options. Compensation consultants call it value-for value repricing. From the shareholders perspective, this does not involve any cost because total compensation is unchanged. Hall and Murphy (2000) show that a risk-averse undiversified executive will prefer a small number of options with a lower strike price than a large number of options with a higher strike price. Thus, the value-for-value exchange is still beneficial to the manager and helps restores incentives effects without any cost to shareholders. Lonestar, Cylink, Sunbeam, and Cendant are some of the companies that have taken a lead in value-for-value repricings.ConclusionA rigorous look at the current repricing practices leads us to believe that it is more of a windfall gain to executives of poorly performing firms than a reincentivization mechanism aimed at retaining and motivating key managerial talent as suggested in the theoretical literature. Weaknesses in the corporate governance structure, lax accounting regulations, and loopholes in tax laws enable executives to reprice options to favorably influence their own pay packages, and they do so in a way that camouflages their real motives. The result is a substantial wealth transfer from shareholders to managers.There is no question in our minds that current accounting and tax rules are the driving force behind the grant of mega-size options and the wave of repricings witnessed in the last decade. The fiction that fixed-price options have no cost for GAAP financial statements, even though they form a central feature of executive compensation plans, should end. It is simply incredible that the same companies that say that no reasonable estimate of option value is available for financial statements turn around and show their cost as an expense in tax returns. The continued use of fixed at-the-money options when potentially superior alternatives such as performance-based or indexed options are available and the gaming of accounting system by the “six and one” repricing programs even though they weaken managerial motivation and provide perverse incentives to reduce stock price, result in potentially suboptimal compensation programs.Source: Avinash Arya, Huey-Lian Sun .2004.“Stock Option Repricing: Heads I Win, Tails You Lose”. Journal of Business Ethics.50.pp.297-312.译文：股票期权重新定价：正面我赢，反面你输简介在大多数上市公司，股票期权已占据了经理层薪酬中的大部分，它作为一种约束高管与股东经济利益的方式，深受公司青睐。虽然这些期权的行使价在授出时是固定的，但是当股票价格下降到低于行使价时，一些公司会对股票期权进行重新定价。近期低迷的股市就促使了许多公司选择重新定价（商业周刊，12月11日，2000）。重新定价在两种情况下发生：（1）或者是行权价降低了（2）或者是现有的股票期权被取消了，并发行了较低行权价的新期权。批评者反对重新定价，因为股票价格不管上涨或下跌，管理者都会得益。通过消除对管理人员因管理不善而导致股票价格下跌的财务处罚，这样会破坏股票期权的激励效应。具有讽刺意味的是，当管理者因表现不佳被解雇时，重新定价会最终提高企业经营者报酬。机构投资者认为重新定价是由于公司无效的治理，管理者经常使用他们的投票权以阻止重新定价的建议等原因而引起的一种公司为巩固其管治不力从而采取措施的的现象。他们反对重新定价，因为每一授予员工的新股都会稀释现有股东的控制权和回报。支持重新定价的公司董事会认为期权远远超出预期一大笔钱，使任何激励都缺乏了动力，而重新定价可以恢复管理层奖励的做法。另一种在硅谷很流行的解释是重新定价对留住人才是必要的，否则优秀员工会被你的对手公司所挖掘。这些公司给予员工股票期权，以节省现金和留住其最宝贵的资产人力资本。当然，其中一个隐含的假设是，留住的这些管理人员对公司生存和业绩改善是必不可少的。建议理论文献表明重新定价能有效解除员工士气低落和高营业额的问题，尤其是那些智力资本是公司最重要的资产的企业。然而，由于目前监管制度，公司治理和激励功能失调等方面的不利影响，重新定价已失去其意义并会产生不良后果。为减轻重新定价的副作用和影响，我们提出了以下建议：（1）教育公众了解关于股票期权的真实经济成本（2）推动监管改革（3）加强公司治理（4）修订CEO薪酬计划1、教育公众了解关于股票期权的真实经济成本许多公司的董事会认为重新定价是一种低成本的期权，因为重新定价并不要求记录会计变更，也没有现金流出。唯一的成本是期权行使时股权被稀释。稀释效应可以通过购回股份很容易地抵消掉。这也就难怪当股价下跌时议会倾向于重新定价。一些政界人士一再声明，如果执行价格等于授予日时的市价，员工股票期权会没有价值。他们的声明反映了他们要么是会计知识的匮乏，要么是意图去欺骗大众。然而，关于股票期权在授予日没有价值的说法，似乎商界和大众市民都已普遍认同了。如果公司决定出售期权，而不执行期权，这样事前期权的经济成本将是外部投资者支付的一大笔钱。事后期权的经济成本是执行价格与股权行使日的市场价格之间的差额。会计和金融领域的学者能够在教育管理人员，董事，政治家，以及有关广大市民了解期权的真实经济成本中发挥有效的作用。他们可以帮助公司的董事会，人力资源管理人员和高级管理人员理解布莱克斯科尔斯模型或二项式期权定价模型中期权估价公式如何运用，以便使那些参与设计薪酬的人意识到了股票期权授予和现有期权的重新定价的费用对公司而言是昂贵的。关于了解期权真实经济成本的意识的提高也会给决策者施加压力，从而改变会计或税务条例使成本费用更清晰明确，并确保重新定价的公司能承担这些费用。2、推动监管改革监管改革中最关键的两个需要的是：（1）确保方案的成本在财务报表中能明确识别（2）会计处理与税务处理有对称性。金融经济学家都认为股票期权是昂贵的。联邦储备银行主席格林斯潘最近向美国参议院财政委员会的声明中描述，期权成本并没有显示在财务报表中这会引起了市场严重的失真。在同一听证会上，诺贝尔经济学奖获得者约瑟夫斯蒂格利茨教授谈到，市场是误传的，并主张股票期权成本应确认为一项能合理估价的费用。当未来期权行使时，它的实际成本是市场价与行使价之间的差额，可以确定出授予时的估计成本和真实成本之间的差异，以此来调整收入。如果该期权不行使，估计的股票期权成本是可以逆转的。这可以阻止过多地给予期权，同时可以鼓励公司提供管理理论上更优的指数期权等激励权利。期权的固定价格和可变价格之间的区别是荒谬的，所以由I44允许的“六一”策略中，重新定价是永存的。税法的变化也需要确保会计与税务处理的对称性。具体来说，如果公司从应纳税所得中扣除不合格股票期权，它们也应该被计入费用，从而减少了报表收入。3、加强公司治理加强企业管治是一种遏制滥用重新定价方案的显著措施。原则上，它涉及实施职责分离模型。基于一些讨论的结果，可以采取以下行动步骤：（1）委任一个非执行董事作为董事会主席（2）在董事会的薪酬委员会里委任外面的独立董事（3）重新定价的一些意见要经过股东的批准（4）鼓励机构投资人或交易单位所有者持续监测管理者的决定。4、修订CEO薪酬计划虽然在新的会计准则下，常规的重新定价变得更困难，在股市持续下滑时，要求议会以薪酬形式做出适当的薪酬回应。我们建议薪酬计划做出如下的改变，以此来留住和激励关键员工。a、增加股本补助。如果能使管理者的激励效应与股东利益一致，这就可以相应缓解代理问题，公司可以授予首席执行官股票而不是期权，一样能达到同一目的。 股票价格急剧下降使期权也贴水。由于高层管理者认为这样的期权没有什么价值，所以公司不向他们提供任何奖励补助（哈兰墨菲，2000）。另一方面，在股市下跌时，股票仍然可能是珍贵的。此