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- Title
How to Help Employees Better Value Stock Options as Compensation.
- Authors
Convery, Susan P.; Farrell, Anne M; Krische, Susan D; Sedatole, Karen L
- Abstract
The article looks at employee stock options (ESOs), as of 2013. It focuses on how employees understand and estimate the value of their ESOs and on how those estimates can be improved through employee education. The authors note that because financial options can be exercised in the future, their valuation involves a time factor that is not well understood by most laypersons. They discuss various theoretical approaches to option pricing, including the Black-Scholes Option Pricing Model. They describe a study they conducted showing the effectiveness of basic education concerning the time value of money in improving the accuracy of people's estimates of the value of ESOs. The benefits to employers of educating employees in this area and the role of the financial planner are also discussed.
- Subjects
EMPLOYEE stock options; VALUATION of stock options; FINANCIAL literacy; TIME value of money; COMPENSATION management; EMPLOYEE training; FINANCIAL planners; EDUCATION
- Publication
Journal of Financial Planning, 2013, Vol 26, Issue 1, p34
- ISSN
1040-3981
- Publication type
Article