Ethics of Stock Option Case Study Example | Topics and Well Written Essays - 500 words

Ethics of Stock Option - Case Study Example The stock option was based on the company shares thus resulted in an increased urge to the executives to raise the stock’s price. Some of the executives chose foul ways of raising the stock prices such manipulating of companies financial statements, firing of employees and closing of plants to increase the company income. The executives thus looked for ways through which they could engineer the stock prices for their own benefits. The grant date for the stock option was also chosen by the executives which meant they could do it in a way that favors them; for instance when the market share price was lowest to benefit the recipients. Stock price manipulation also resulted in increased salary gap between the highly paid employees and the lowly paid employee in the company. During market downturn due to stock price manipulation, investors suffered as a result greedy character of the executives while the executives were being awarded for the failures of the company. (Raiborn, et al ., 2007). All these ethical issues of stock option handling needed to be looked upon for a moral reason. Due to the many shortcomings of the old ways through which stock options were handled, new changes were made that could reduce the unethical issues that arose and enhancing of doing the right things for the right reasons. The changes included new laws of reporting stock option grants within two days of issue, â€Å"synthetic† re-pricing and the indexing stock options. The changes had a great impact on the ethical issues as they enforced rational stock option awarding. (Raiborn, et al., 2007) Manipulation of the stock prices reduced and the employee received what they deserved. Even so, new ethical issues arose from the changes as the adoption of the Spring- Loading and Bullet-Dodging by some companies which benefited some of the participants of the company which was unethical. Stock option handling in the past raised some ethical issues. These were reduced by the recent changes even though more ethical issues arose.