Those days are likely over, for a variety of reasons, including shareholder concerns about the ever increasing dilution due to the issuance of options and new accounting rules requiring companies to expense options... In addition, studies have shown that the accounting cost of stock options exceeds employees' perceived value of those options. Finally, there has been a crisis in governance that has caused a reexamination of corporate accounting standards. No wonder some feel that stock options are dead in the water."

Compensation committees are now facing serious challenges. It is the job of the committee to have a valid, sound and sensible pay philosophy in order to determine compensation that best suits the company policy and shareholders interests: "...compensation committees must decide how to use a company's pay philosophy to best advance its overall business principles and goals."

Stakeholders are now expecting compensation to be closely tied with performance because...
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