Numerous issues force organizations to curtail the provision of stock options to their employees. Jeremy Goldstein outlines three major ones that include the possibility of stock value dropping considerably thus becoming difficult for employees to manage their choices. Many stockholders will overhang the options because they need to add the associated expenditure in their reports. Secondly, the stock options may create substantial accounting burdens with the relevant costs eclipsing the financial benefits of the derivatives. Lastly, most of the employees usually become burdened by this compensation model because the options become worthless with economic downturns.
However, there are still many advantages of providing stock options to employees. The staff members easily understand stock options hence this kind of compensation continues to gain preference for additional insurance coverage, equities, or wages. The stock options offer a better alternative to all staff. Also, because the stock derivatives only lead to increased personal earnings whenever the company’s share value increases, the employees always get motivated to achieve more considerable success for the institution as their priority. The employees will work towards attracting desirable customers, satisfying their existing clients, and developing services that are innovative. From the company’s perspective, it is often cheaper to offer options other than shares, especially for top executives.
Jeremy Goldstein maintains that companies can still minimize excessive costs while continuing to provide stock options to their employees so long as they employ the correct strategy. The organization must ensure minimal overhang and minimal expenses. Therefore, the best option according to Jeremy Goldstein is to adopt a knockout barrier option. The knockout options have same vesting requirements as well as time limits as the ideal options. Nevertheless, if the shares go below a certain amount, the employees would lose them. The mechanism reduces initial accounting expenses and executive compensation.
Jeremy Goldstein is a famous attorney that many corporations turn to when they require legal advice concerning the provision of employee benefits. He is a partner at Jeremy L. Goldstein & Associates which has a dedication towards the provision of legal information related to corporate governance and executive compensation. He has vast experience through his involvement with significant corporate transactions such as Goodrich’s acquisition by the United Technologies.
Jeremy Goldstein is among the leading compensation lawyers. Jeremy speaks and writes about executive compensation and corporate governance. He is also a director of Fountain House which is a charity that dedicates itself to assisting people to recover from mental illness.
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