There are strict rules towards issuing new shares for cash money. They can just issue new shares for cash and then use the cash for making payroll. (well, they technically could, but there's a lot more work involved in that and it paints the company in a much more negative light).If they're willing to do that then why not put the money towards keeping as much of their staff as possible. A hand full of executives are less important than 90% of their staff I think.
Also someone said this earlier, where are they going to go right now?
Paying executives partly in stock options is extremely standard and there is nothing out of the ordinary about this.