The limited Brands

Stock options are a form of compensation granted to an employee, by an employer, in lieu of salary and wages. Stock options grant employees the right to purchase a certain number of shares at a given price . Traditionally, firms have compensated their employees through some combination of salaries, commissions, or bonuses. Less prevalent was compensation tied to firm¡¯s performance, such as stock and/or stock options. Historically, performance-based compensation was designed for corporate executives and officers of the firm. This form of compensation helped align the interests of management and shareholders. Stock options encourage managers to maximize shareholder value. Although stock options were once reserved for upper management, there has been a trend to include more employees.
Generally, the future purchase price, or strike price, is equal to the market price of the stock at the time of grant. When an employee exercises options, he or she pays the firm the strike price for th...