Stock Options Are Part of The Problem

I'm not the only one who thinks that replacing stock options (warning, audio file) in the corporate executive pay packages with stock ownership that executives are required to maintain is a critical element of corporate governance reform. This is because stock options create an incentive for short term games and no proportional penalty for poor performance, while buy and hold stock ownership aligns executives incentives with their shareholders.

A key piece of the problem is the tax code which greatly favors stock options relative to stock for services arrangements.

The commentator also suggests that successful companies rarely lay off employees, but often stockpile cash.