A new study conducted by researchers at the Mendoza College of Business at Notre Dame suggests there is a noteworthy correlation between offering substantial stock options to the CEO and future product recalls.
Published in the Strategic Management Journal, the findings indicate that these stock options, which are often used by boards of directors as a way to encourage CEOs to go after high-risk initiatives, can quite often result in a higher percentage of safety problems.
From the board's standpoint, they want higher-risk initiatives that have the possibility of earning their shareholders more money. But CEOs tend to naturally be naturally more reticent to take chances. Stock option pay is one way boards try to balance this tendency.