In the post-bubble era, equity investors are increasingly aware of the costs associated with substantial grants of stock options and other equity based executive incentives. Over the past three years market volatility has weakened the 1990’s assumptioms that “stock prices always rise in the medium term” and that “shareholders will tolerate dilution of returns in a casino where everyone is winning”. The result is that companies are now under real pressure to limit the number of new shares created for employee incentive programmes, as well as to tighten the performance tests on which they rely.
