Stock options used to be the go to method for giving bonuses to employees because they're cheap and potentially very valuable. However, they don't work very well if the stock is stagnant, so in that case the fall back is usually to just give stock grants which are really no different than getting cash.
With options employees have an incentive to retain equity in the company, which has a lot of good side benefits, not least of which is that it gives employees more of a stake in the company's future. It's also a way to reward employees financially by making them rich if they stick around long enough to collect enough options, have them vest, and have them increase in value significantly over time. A lot of techies have become millionaires through stock options.
Since MSFT's stock has been stagnant since the late '90s stock options as a reward aren't an option, which removes all of those benefits mentioned above and creates a further encouragement for ambitious employees to seek other companies where they have a reason to hold stock in their employer and where they are significantly financially rewarded for sticking around and doing good work.
With options employees have an incentive to retain equity in the company, which has a lot of good side benefits, not least of which is that it gives employees more of a stake in the company's future. It's also a way to reward employees financially by making them rich if they stick around long enough to collect enough options, have them vest, and have them increase in value significantly over time. A lot of techies have become millionaires through stock options.
Since MSFT's stock has been stagnant since the late '90s stock options as a reward aren't an option, which removes all of those benefits mentioned above and creates a further encouragement for ambitious employees to seek other companies where they have a reason to hold stock in their employer and where they are significantly financially rewarded for sticking around and doing good work.