Stock options encourage CEO's risky investments [November 8]


A New Yorker piece that examines the disarray on Wall Street following the collapse of the subprime mortgage market attributes it to the incentives hedge fund managers and investment bank CEOs are given. More specifically, the New Yorker found that CEO’s who are given compensation in the form of stock options are more likely to make risky investments. According to a study by two business professors—one of which happens to be Darden assistant professor Jared Harris—generous options may also encourage fraud.