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Bridge over ocean
1 March 1997 Financial Analysts Journal Volume 53, Issue 2

A Derivative Alternative as Executive Compensation

  1. Don M. Chance

Forward contracts are superior to options as executive compensation. Forward contracts require the executive to purchase the stock, have no value when issued, and are easily valued during their lives. They provide the same incentives as stock but without the right to vote, which limits the executive's influence over the board.

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