Generous stock options linked to product recalls
Study shows if abundant options lead CEOs to be more aggressive, it may cause more mistakes and thus affect consumers.
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OUTSIZE executive pay packages have frequently been a flashpoint for stockmarket investors. Lavish executive compensation at publicly traded companies should be a significant concern for consumers, too.
That's the message of a new study by three academics at the University of Notre Dame in the United States. Their research focuses on companies that rely heavily on stock options in executive compensation. They have found a correlation between generous option grants and the incidence of serious product recalls.
Stock options have been the jet fuel propelling some of the biggest executive pay packages over the years. From an investor's point of view, these instruments are problematic because they provide an executive with little downside if the company's underlying shares fall but oodles of upside on the rise.
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