The Determinants of Stock Option Compensation: Evidence from Finland

A new, long, and rich panel data set consisting of all Finnish publicly traded firms is used to study how firm characteristics and stock market developments influence the adoption and targeting of stock option compensation. Stock option adoption is found to be a procyclical phenomenon. Findings from firm-level econometric analysis often corroborate those based on U.S. data, but important differences also emerge. Findings include: (i) firms with higher market value per employee are more likely to use stock option compensation; (ii) share returns from the past year affect the adoption of targeted stock options, but not broad-based plans; (iii) our results are consistent with the hypothesis that selective and broad-based plans arise as solutions to differing monitoring difficulties. Broad-based schemes are observed when production is human capital-intensive and employee performance is hard to monitor, while selective schemes are adopted when ownership is dispersed and therefore owners may have weak incentives to monitor management

The network economy and models of the employment contract

The development of the ‘network economy’ and project-based work challenge established methods of regulating employment relationships. There appears to be an unsatisfied demand for its greater use, especially among employers, and this may be blocked by the lack of suitable contractual forms.. Project-based work seeks to retain some of the open-ended flexibility of the standard employment relationship in relation to its task content but not its duration. The paper argues the success of the standard employment relationship stems from articulation of its psychological, economic/incentive, and legal aspects. As yet, this appears to be lacking for more transient forms of relationship