Evaluation of stock option plan, structure of the plan, and traditional stock option plans.

Throughout this course we have discussed the ‘agency problem' - i.e., when the interests of owners and managers are not properly aligned. We noted that this was particularly problematic with senior level managers at many U.S. public corporations. To address this issue various academicians have argued for greater ownership of the corporation by management, often through the award of stock options, yet we have seen that in many cases this has had drawbacks as well. What are some of the ways you might structure a stock option plan (or outright award of stock) to mitigate some of the abuses that traditional stock option plans have created?