The use of stock options for executive compensation has become a lightning rod for public anger in the wake of the series of corporate disasters and frauds reported in the press over the past year. One can easily see why: Top executives at many of yesterday’s star companies grew hugely rich on the gains they made on their options, profits they’ve been able to keep even as the value these people were supposed to have created disappeared.
A version of this article appeared in the December 2002 issue of Harvard Business Review.