Options and RightsFirecracker, it is all good to create an incentive for managment and board memebers to reward them for future higher share price but it is a double edged sword for the share holder.
There are different rules and agreements for options and rights but in the end they both casue dilution to the share holder. Options typically do not cost the recipients any out of pocket money and the company has to come up with cash to pay them the difference (if sp increases) down the road when they exercise them. Rights, a little different and actually puts money into the companies pockets when issued, they are just a way of selling future shares to insiders at a price lower than the current share price. IE share price $4 today and insider buys rights for $3, pays that to the company........in the end the share holder pays.
If share price shoots up and options get exercised it can cost the company a lot of money when they get exercised. Giving out too many percentage wise of outstanding shares is not good for the health of the company. g