Stock Options Make for Risk-Happy CEOs

Companies compensating their CEOs with stock options should prepare for a bumpy ride, as those CEOs are more likely to take big chances that backfire, a new study finds. Shareholders took extreme losses from more than 10% of option-heavy CEOs, compared to 6.8% who saw big gains. The study's authors say it’s like “handing money to a gambler and... promising to share only the upside.”

The review of 950 companies in a range of industries by management professors at Penn State and BYU tracked results between 1993 and 200, Reuters reports. “There are only a few hitters who when they swing for the fences get a home run,” BYU's W. Gerard Sanders adds; conversely, only 2.5% of option-light CEOs steered their companies to extreme loss. (More CEO stories.)