Employee Stock Options

Options are important in corporate finance in a lot of different ways. In this section, we begin to examine some of these by taking a look at employee stock options, or ESOs. An ESO is, in essence, a call option that a firm gives to employees giving them the right to buy shares of stock in the company. The practice of granting options to employees has become widespread. It is almost universal for upper management, but some companies, like The Gap and Starbucks, grant options to almost every employee. Thus, an understanding of ESOs is important. Why? Because you may very soon be an ESO holder!

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