Option Expensing and Managerial Equity Incentives
Why this work is in the frame
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Bibliographic record
Abstract
We examine the impact of mandatory option expensing on managerial equity incentives. Though effective only after June 15, 2005, there is evidence that U.S. firms begin preparing for option expensing as early as 2002 by making changes to their equity incentive plans. We find that (1) CEO option incentives exhibit a sharp reversal during the period 1993‐2005, with the median CEO option incentives increasing 25% a year before 2002 but declining 17% a year after 2001; (2) the reduction in option incentives after 2001 is larger for firms that use excessive levels of equity incentives prior to 2002; (3) firms make similar reductions to options granted to CEOs, other top executives and lower‐level employees; (4) CEO stock incentives increase throughout the entire 13‐year period, rising at an even greater rate after 2001; and (5) the increase in stock incentives after 2001 is far from offsetting the corresponding decrease in option incentives. These findings are robust to controls for firm and CEO characteristics and for concurrent regulatory, business and market events such as the Sarbanes‐Oxley Act of 2002, the option backdating scandal, and the 2000 stock market crash. We also provide a theoretical explanation for the documented changes in option incentives.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.001 | 0.000 |
| Scholarly communication | 0.000 | 0.002 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it