4. the employee benefitted only when the shares increased in value. The employee had a free ride in the sense that he had no downside risk. At one time tax treatment was favorable and the stock option plan was a way for the executive to accumulate a sizeable capital estate if the shares advanced substantially. For years interest and carrying costs were low on funds borrowed to exercise options but this has changed. When inflation was modest and the country in good repair, market prices rose when earnings rose and dividends were increased. The attractiveness and the usefulness of stock options has declined to a great extent because of changes in tax treatment, SEC reporting and "insider" regulations, and the failure of the market price of many companies to rise above their option prices. As a consequence - a) Qualified stock option plans are falling into disuse; (b) Non-qualified plans survive but are being supplemented by other compensation plans; (c) Stock appreciation rights are being used to meet the "insider" problem which can create the otherwise unavoidable need for the optionee to go into debt to exercise his option; (d) Performance units have been devised to reward the employee provided certain goals are met even though the option plan is under water.