mohit | Shared With: Everyone - Oct 10 2007 | stock options, business, news, economics
Regarding stock options and their impact on organizational behavior...
Quoted: The authors, two economists, Gerard Sanders and Donald Hambrick, observe that options create asymmetric incentives: they pay out when a firm’s share price rises above the option exercise price, but once they fall below the exercise price, all further falls make no difference to the ultimate payout, which is nothing. This, posit the authors, gives an incentive to take big bets, by investing in risky activities with long odds on a high pay-off.
- mohit | Shared With: Everyone - Nov 19 2007 | risk, stock options, hedge funds, investing, investment club
Quoted: Hedge-fund managers, for instance, typically are paid “2 and 20”: they get two per cent of total assets as a management fee, and they keep twenty per cent of their investment gains (above some agreed-upon benchmark).
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Fund managers get bonuses at the end of each year, and they keep those performance fees even if the fund eventually goes south. So if a billion-dollar hedge fund rises twenty per cent in its first year and falls twenty per cent in its second, its investors will have lost money, while the fund’s manager might earn forty million dollars in performance fees.ShareViewed: 4 Times
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