Can stock options be granted outside a formal stock plan?
Nonqualified stock options (but not incentive stock options) can be granted without a formal plan. However, this is rarely done outside privately held companies. Publicly traded companies generally obtain shareholder approval for the stock plan under which grants are made. Shareholder approval is required to achieve the tax deductibility of large equity awards to executives, to satisfy the listing requirements of stock exchanges, and to demonstrate good corporate governance.