50 Things That Made the Modern Economy Stock option
Nov 25, 2019
Explore the intriguing origins of stock options, tracing their roots back to ancient Greece and their evolution in modern business. Discover how these incentives were designed to align executive pay with company performance but often lead to a growing disparity between CEOs and average workers. The discussion critiques whether stock options truly motivate top management or simply inflate their earnings further, raising questions about the effectiveness and morality of executive compensation.
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Clinton Cut Tax Deduction For High Pay
- Bill Clinton limited corporate tax deductions for salaries over $1 million to curb excessive executive pay.
- Firms then shifted compensation into stock options to retain tax advantages.
Thales' Olive-Press Option
- Aristotle recounts Thales securing future rights to olive presses before a predicted bumper harvest and profiting handsomely.
- This episode is the earliest recorded example of an option contract.
Options Offer Asymmetric Payoffs
- An option gives asymmetric payoffs: limited loss (the premium) and larger upside if the share price rises.
- If the price falls the option can expire worthless; if it rises you can exercise and make a profit.
