Ann: Appendix 3B - ESOP, page-124

This would only be less expensive if your valuation is under 55c. Or are you saying we should be giving them more overall, to lure better people?

Because if the employees valuation of the company is lower than yours, increasing the volume to moneyness ratio is giving them more value for less perceived value. To a stranger to the company, we can assume their valuation of the company is roughly the market price, and that an investors valuation will be ABOVE the market price. So in reality we should be giving them as high a moneyness to volume ratio as humanly possible.

On the other hand if its motivation you are concerned with, volume is the only thing that matters, since changing the strike price changes value and perceived value at the same rate. It has no effect on upside leverage what so ever.

There is a narrow set of circumstances where what you suggest is a good idea but I don't believe those circumstances are reflected by reality