Shareholders expect a higher return on their equity investments than providers of debt - equity is frequently scarce and expensive
Many medium and long term incentives are equity based - this can provide an alignment of interests with those of the shareholders
After IFRS 2/ FRS 20/ FAS123R accounting standards companies need to compute and expense the cost of options and other share-based reward
This expense for options levels the playing field and allows companies to consider different forms of equity incentives - considering each on its own merits
