Reference no: EM132412228

Based on: At the recent shareholder meeting, the CEO of a small bank proposed a plan to offer each of its employees 250 incentive options for Class A common stock. The key provisions of the plan are that employees must exercise the options between January 2014 and December 2019, and if an employee terminates his or her employment with the bank (or is terminated), the options are no longer exercisable. One shareholder vehemently objected to the plan, claiming that such a move would dilute the value of the outstanding shares. As CEO, how would you defend the stock option plan to the shareholders?

The statement:

The CEO has a few points to make in order for the employees to fully understand the incentive plan. While it is natural to be suspicious of change, shareholders must understand that the plan is designed to maximize the value of the shares as much as possible, by giving employees reason or incentive to stay with this bank specifically. This reduces turn-around time on hiring, less resources are used training new people, and by having experienced workers they minimize the risk of error. Finally, a bank has a "face" to its organization. There is a positive presence for the consumer to see continuity from the bank. By using stock options as incentive, employees will be motivated to stay in good standing with their employer and ultimately make the company more profitable for its shareholders.

The statement that I mentioned above, do you agree or disagree, and why?