Answer to Question #25813 in Economics of Enterprise for Louvenia Sanders

Question

Based on what you discovered in the e-Activity, determine the best way the company you research could leverage stock options to offset employee compensation. Explain your rationale.

Answer 1

Stock options provide the employee the ability to purchase shares of the stock at a
set price, regardless of the market price, within a certain period. PepsiCo
offers its employees stock options at an amount equal to 10% of base salary.
Employees share the victories and defeats of the company when the price of the
stock market going up or down. Balance work and personal life focuses on the
benefits and strategy that is oriented on the reliability of payment eliminates
those components that are associated with the risk not to receive compensation
in the event that for whatever reasons, the company will not receive the
expected returns, or if the stock market falls prices for the company.
Stock-based compensation expense was $352 million in 2010, $227 million in 2009
and $238 million in 2008. At year-end 2010, 154 million shares were available for
future stock-based compensation grants. Experts believe that turning employees
into shareholders increases their loyalty to the company and leads to improved
performance.