Section Fivethose having satisfactory performance. It has been asserted
that such forms of compensation add value by (1) helping to
attract and retain employees, (2) building organizational
commitment, (3) reinforcing skill and knowledge acquisition,
and (4) motivating behaviors in line with the company’s
strategic objectives. Thus, for broad-based stock options to
have an effect on performance, they should make a positive
contribution in at least one of these four ways.^9
The literature indicates that broad-based stock options
may not produce all of the benefits that their proponents have
claimed. For example, there is little empirical evidence
supporting the effectiveness of broad-based stock options in
attracting potential employees. Likewise, stock options are
probably not universally effective because there are several
factors that influence their impact. As an example of their
specific applicability, it has been observed that stock options
work better for employees who are comfortable with risk.
Employers such as Microsoft use stock options to attract risk-
taking employees. Stock options can even help with retention
because their impact can be enhanced by the use of vesting
schedules that do not allow options to be exercised until
employees have stayed with the company for a certain number
of years.^10