TY and JK Companies-share options

　　The granting of share options means that the directors have the right to buy shares at the current price in a number of years' time. If the price of shares has increased, then the directors will make a profit based on the difference between the two share prices (current and the future price). Options appear to be a good method of rewarding long erm performances as they are normally granted for periods in excess of three years. However, there remains the issue that directors may attempt to increase share price near the option date.

　　Having 20% of remuneration as options is probably acceptable. Many companies even require directors to purchase company shares to show their long-term commitment to the company. Forty per cent may be excessive as this does focus longer-term remuneration on one measure. If there is a declining market overall, then the value of JK's shares may also be falling through no fault of the directors. Use of share options in this situation is unlikely to be particularly motivating.