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Hi, Ken, the model answer (Q.3(b) Dec 2022 exam practice platform) exhibits the following:
Executive Share Option Scheme
Benefit
The directors are in a STRONG POSITION TO INFLUENCE Spiggie’s share price, hence achievement of the reward is controlled by them to some extent.Problem
Spiggie’s share price will be strongly influenced by external factors OUTSIDE THE DIRECTOR’S CONTROL, such as changes in the economy and movements in the value of other listed shares.Are there any contradiction arising?
In case my examination script exhibit such way, Is it disadvantageous to earn credit?
External influences will always affect share prices. However, directors can also have an influence. For example, talking up or talking down new product launches or the acquisition of potential new customers. For example, the company might be developing a new product. There are legitimate reasons to keep that secret (to keep competitors in the dark) but the timing of the release of news about a new product will obviously affect when the share price reacts.
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