Chapter 25 Stock Options
The participation of employees in the company’s economic success serves to bring the interests of the employees in line with the interests of the shareholders in increasing the profit of the company. Stock options and other equity awards may help to create an entrepreneurial spirit within the company’s workforce increasing the motivation and loyalty of the staff. Since stock options usually cannot be exercised for several years after they have been granted and become void if an employee leaves the company, the options tie employees to their employer. In addition, they enable firms to pay competitive wages without a drain on liquid funds. The stock corporation (Aktiengesellschaft, AG) is the most suitable corporate form under German law for participation of the employees in such a scheme as the shares are most interchangeable and marketable. Due to the financial and economic crisis, stock options and other equity incentive awards came under stringent review. It can be expected that in the future stock options will only be permissible if the focus is on long-term incentives. The grant of stock options and other equity awards affects various areas of law, including corporate, labour and employment, insider trading, securities and tax law.