To be sure, an untied option grant can be thought of as an option whose value moves with the performance of the corporation relative to the competition, coupled with a call option on, for example, the S&P 500 stock index. It can be argued that the latter is merely another form of compensation that helps firms retain valued employees.
I am sure that is right, but does a compensation system tied to the overall stock market serve a company well? *  *  *  Let me now turn to option accounting. A stock option is a unilateral grant of value from existing shareholders to an employee.