Peace Cake Bakery (PCB) is considering providing share-based compensation to its managers and employees. Kelvin, the CFO,
Question:
Peace Cake Bakery (PCB) is considering providing share-based compensation to its managers and employees. Kelvin, the CFO, is deciding between employee share options and SARs, but is unsure of the difference between these types of share-based compensation. Which of the following statements describes differences between employee share options and SARs that PCB should consider?
A. Share options can be settled in cash or equity. SARs are settled in equity.
B. Share options issued to employees are a type of share-based compensation, but SARs are not.
C. Employees do not pay an option price to obtain the benefit from SARs, whereas they do pay to exercise share options.
D. SARs allow the employees to profit when the market price of the company's shares improves, whereas employee share options do not.
Expert Answer:
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