Stock options have been called the pay program that “built Silicon Valley,” because of their key role as incentive pay for employees in high-tech companies. They were popular during the 1990s, when the stock market was rising rapidly. Since then, stock prices have fallen.
a. How would you expect this change to affect employees’ attitudes toward stock options as incentive pay?
b. How would you expect this change to affect the effectiveness of stock options as an incentive?