Which of the Following Differentiates Between Stock Options and Employee

question 16

Multiple Choice

Which of the following differentiates between stock options and employee stock ownership plans?

• A) Stock options are a part of the salary received, while employee stock ownership plans are a form of the other compensations.
• B) Stock options allow employees to buy stock at a fixed price, while employee stock ownership plans involve giving stock as reward for performance.
• C) Stock options have a short-term validity, while employee stock ownership plans are applicable in the longer run.
• D) Stock options are available to employees only, while employee stock ownership plans are given to outsiders too.
• E) Stock options are provided on a team basis, while employee stock ownerships are offered at the divisional level.

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Definitions:

Lemons Problem

A phenomenon where the presence of information asymmetry in a market leads to low-quality products being sold, as sellers have more information about the product than buyers.

Moral-Hazard

A situation where one party engages in risky behavior knowing that it is protected against the risk because another party will bear the cost.

Above-Equilibrium Wages

Wages that are higher than the market equilibrium, often used by employers to reduce turnover or increase productivity.

Firms

Businesses or enterprises engaged in commercial, industrial, or professional activities, aiming to earn profits by providing goods or services.