Because indexed stock options pay primarily for out performance, they are highly leveraged.

FORBES: How To Salvage Stock Options

Switching from plain vanilla to indexed stock options, in particular, focuses top executives on making their company outperform competitors and the market as a whole, which would better serve to align executive and shareholder interests.

FORBES: Magazine Article

Indexed options work similarly to traditional stock options, with one exception: Rather than having the exercise price fixed at the market price on the date of grant, the exercise price varies based on the change in an appropriate stock market index, e.g.

FORBES: How To Salvage Stock Options