As the season for voting proxies and attending annual meetings recently came to an end, I became discouraged with the fact that the structure of most bank executives' option packages - and those of most of American industry's executives, for that matter - remains woefully inadequate as a tool for motivating these executives to generate high returns on their shareholders' capital. In most instances, senior bank managers are merely granted a large number of options with a fixed exercise price that vest over the following five years, or some such period.

To illustrate the shareholder abuse perpetrated by such options packages, I'll use the real-world example of ThriftCo - I've changed the name of the actual company to protect the guilty - whose board of directors decided this year it would be in shareholders' best interests to grant the company's CEO 200,000 options. (That 200,000 options equaled almost 3% of the company's total outstanding shares is another issue entirely.)

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