A stock option gives the holder the right to purchase a share of company stock at a particular price for a set period of time, usually 10 years. The price at which options may be "exercised" is usually the price of the company’s stock on the date the options are granted. If the company performs well, the stock price will increase over the exercise price, giving the options value and rewarding the executive for his role in the company’s success. The sensitivity of options to market conditions aligns the compensation generated with shareholders' interests, but also means that stock price may increase or decrease regardless of the company's performance. Typically, such options may not be exercised for a period of time, usually between one and five years, before they "vest," or can be exercised. In addition, despite their clear alignment with stock price performance, options are not considered to be performance-based by proxy advisory firms and some institutional investors because they generally lack an additional performance vesting requirement where the company must achieve specified results for the options to vest. For these reasons, the share of options in long-term incentive plans have decreased considerably as performance-based incentives such as performance shares and performance units have increased. The Center believes options have a place in a well-balanced compensation design, especially to demonstrate alignment with shareholders over the long term.