Suppose that the stock is at $30. If you look at the price of options --- they would typically be exercisable at $30, $35, $40, etc. --- you will find that the option exercisable at $40 costs only a few pennies. That's right: you may pick up that option for a nickel. Suppose you bought it, and the (pharma) company announces in December some super new drug. The price of the stock sktrockets to, say, $45. What's your profit? You exercise your option at $40 (buy the stock at $40) and immediately sell at $45. You het $5.00 from a nickel investment.
Had you bought the option with the strike price of $30, your profits would be even greater: now you buy at $30 and sell at $45, for a profit $45-30-15. That's a real killing, but you could not have bought it a nickel; it probably costs $2. So you turned $2 into $15.
There is a catch: if you boght the $40-option for a nickel and the price of the stock never reaches that level from today's $30, you lose ALL of your investment.
Back to manager's compensation. They typically receive out-of-the-money options; that is, if the stock is at $30, he'll be given the options at $40 which are worth.. a nickel. If he (or the rest of the company) performs poorly, the stock does not rise, and he loses all of his options.
The media reports only the success stories to cause envy and anger in us.