Share options as part of executive remuneration: aligning the interests of stakeholders

Abstract

Performance-based remuneration, often in the form of share options, has been endorsed by researchers throughout the world as a way to align the interests of stakeholders and executive management. The wave of corporate scandals raised concerns regarding the design of executive remuneration and the extent to which share options truly align the interests of executive management and stakeholders. This article investigates the impact of share options on managerial behaviour. The article proposes changes at an internal governance level with respect to the remuneration of directors so as to align the interests of the remaining stakeholders. The article also discusses
the disclosure of directors’ remuneration. The article concludes by presenting a summarised best practice framework.