Wall Street Journal Article - Summary Assignment

Wall Street Journal Article - Summary - Assignment Example Thought this timing of granting options cannot be termed as illegal, critics believe that providing such grants at the time of merging helps the parent companies acquire the target with low cost premium relative to other bidders. As discussed in Chapter 41, stock options were given to the employees of the company in order to provide them with motivation towards team success and organization improvement. But it could lead to ill effects as such the employees trying to do illegal activities like rewriting books in order to keep their options in a profit rate. The article proves as evidence to what was discussed about the illegal activities. The allowance of extra shares to executive officers during a pre-deal affects the value of share holders stocks in a large way. The grants of the shareholders are affected in two ways, one being positive to them, the other in a negative way. The shareholders can be deprived of their share value with the dilution of its cost by providing extra shares to officers. Or, they can benefit with the incentives that are obtained through the merging with other companies. The executive officers, due to the extensive revenue they get through takeover bids promote mergers and acquisitions in a large way. Examples of such merger acquisition done in the past two years include the taking over of Marvel pictures by Walt Disney, where the CEO reaped $34 millions in cash through selling stock options. The allowance of providing pre-deal options to executives is termed as a selfish act by critics and is compared in terms with another activity considered to be controversial, â€Å"SpringLoading†. Though the details were discussed with the SEC, they have declined to take any direct action against it except for ruling that the acquiring companies have to show their annual proxy statements. As the article suggests, the executives convert their options to shares as soon as the deal closes out. This was