An Analysis of Some Problems on Executive Stock Options

As incentive mechanism established for senior managers of companies, executive stock options aim to solve the agency problem in modern corporation. This paper discusses some important and difficult problems on ESO plan.By establishing and studying models, we draw the conclusion as follows: ESO prompts the benefit correspondent between managers and stockholders, help to solve the problem about long－term development, innovation, and manager choice of companies. Meanwhile, the incentive efficiency of ESO hinges on efficiency of stock and manager market, which is the limitation to ESO including the factors such as the macroeconomic condition and industry prospect.