One Way to Settle the Controversy over Stock Options: Eliminate Them

In the wake of news reports about compensation excesses in U.S. companies, Cendant recently announced that it expected to reduce the issuance of employee stock options and use grants of restricted stock instead. That decision has placed Cendant – an $8.9 billion real estate and travel conglomerate – in the vanguard of a movement to reject option-based incentives and return to a more traditional way of rewarding performance. How valid is that approach, and will other companies follow Cendant’s lead?

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