Section Five
A review of the literature indicates several other factors
that influence the performance effects of stock options. For
example, organizational culture appears have an interaction
effect with stock options. It has been found that a combination
of participative organizational culture and stock options
produces faster growth rates while neither produces such
results alone. Productivity effects also appear to lag the
implementation of stock options because three or four years
are required before employees develop commitment and
cooperative work practices. Stock options also appear to work
better in smaller companies. In addition, employees must be
well informed before stock options are likely to influence them
to act like the owners of the company and to align their behav-
iors with the firm’s goals. Information must be shared with
employees and they must be trained so that they can
understand financial measures and be knowledgeable about the
financial drivers of the firm. Employees also need to be able to
participate in decisions and understand the firm’s goals. A
healthy stock market is obviously important.^11
Michael Beer has offered additional advice about the
conditions that should be present before contingent
compensation can be expected to have a positive impact on
firm performance. His critical views also call into question
whether contingent compensation is a universal best practice: