critics of stock options

Many firms pay their top executives with stock options, which give theta the right to purchase shares in the company at a fixed price. When the fin does well, the value of the stocks increases, and hence the value of the option increases. Moreover, the income they obtain this way receives capital gains treatment. Some critics of stock options claim that similar incentive effects can be obtained by tying executives' pay to the performance of the stock, but that paying executives directly has overall favorable tax consequences, once all taxes—including corporate taxes, the taxes paid b: executives, and the taxes of shareholders—are taken into account. Discount (When the company pays executives directly, the wages are deductible from to the firm's income subject to the corporate income tax; the “costs” of stock? options are not deductible.)