A disadvantage of using stock options to compensate managers is that

it encourages mangers to undertake projects that will increase stock price.

it encourages managers to engage in empire building.

it can create an incentive for mangers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.

it causes managers to take undue risks.

it causes managers to be too conservative