What is a nonqualified stock option, how and why is it used to compensate executive management?

Jun 25th, 2016
Price: $15 USD

Question description


  1. You are to write a 2 page paper following APA rules for the title page, citations and appropriate references within the body of the paper. The minimum number of content pages is 2 and the maximum is 4 for the two issues noted in “a” and “b” below.
  2. Locate the following research article using the OCLS and EBSCOhost referenced below: 

Graham, J. R., Lang, M. H., & Shackelford, D. A. (2004). Employee Stock Options, Corporate Taxes, and Debt Policy. Journal of Finance, 59(4), 1585-1618. doi:10.1111/j.1540-6261.2004.00673.x

  1. Your paper is to address the following:
    1. What is a nonqualified stock option, how and why is it used to compensate executive management? You may use other sources, however, you must reference and cite them. Also, remember to reference and cite the textbook.
    2. The author’s research indicates that by using stock options, corporations that trade on NASDAQ can reduce their estimated median marginal tax rate from 31% to 5%. Using information from the article, explain how these corporations use stock options to reduce their marginal tax rates.
  2. In a page following your reference page, use the Accounting Standards Codification to locate the section which discusses accounting principles relevant to stock compensation. Next access the overview and background subsection. Copy subsection 05-3 and paste to the page. Also, properly cite this code section.
  3. Go towww.irs.govand search for Publication 525. Use the Index located at the back of the publication to find the section on "stock options, nonstatutory." Next, select the "exercise or transfer" of option. Copy the section titled "Transfer in Arm’s Length Transaction" to the page. Include a citation of the source.

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Tutor Answer

(Top Tutor) salmona
School: UT Austin

hello, here is the complete answer with the available information. I am looking forward to hear from you.regards


Nonqualified stock option




Nonqualified stock option
Nonqualified stock option refers to a type of the employee stock option where an
individual pays ordinary income tax on the variance between the grant price and price at which
option is exercised (Kahle&Shastri, 2005).
How and why nonqualified stock option is used to compensate executive management
Compensating executive employees by use of the stock options enable the workforce to
have a share of the company’s growth via the provision of the actual avenue for becoming part of
the ownership. Limited and liability companies, partnerships and corporations may use stock
options. The given date by which the organizations provides the executive employees with the
contractual right of purchasing the stock at a stated p...

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