Stock Options and Other Executive Incentive Arrangements

The immense economic expansion and changes of the post-war period have generated numerous problems. In American business a major product of this is to be found in the difficulty of developing and maintaining the reservoir of executive talent at levels sufficiently high that managerial functions can continue to be performed with an advanced degree of efficiency. The shortage of qualified executives has been widely reported. The competition for those available is intense and increasing.

Unfortunately, it would seem that at the very time the need is greatest the normal incentives for an individual to assume major executive status have been most severely reduced. The promise of greater income has little efficacy to induce an executive to work harder or to assume a more demanding position. The current, unprecedented scale of the graduated income tax causes the greater part of any increase in pay to be absorbed in taxes. An executive with a present taxable income of $60,000 could pay $7,800 out of a $10,000 raise to the U.S. Treasury.

Such results will hardly produce substantial incentive.