As we advance more into the technological era, many companies are now opting out of stock options for their employees. They all have different motives in doing so, as some opt out in a bid to save money while to others, there is more than meets the eye. Nevertheless, there are three main reasons as to why many corporations decide to restrain stock options. The first one being the fact that every once in a while, the stock value tends to drop at massive rates thus making it difficult for employees to exercise their options hence putting stockholders at the risk of facing option overhangs. Another reason is that the staff are now getting tired of stock options as a method of compensation as they are already aware of the negative impact economic decline places on them. Lastly, they result in massive accounting burdens, and they are not that valuable in comparison to the salaries they would get if the stock options were eliminated.
Nonetheless, just like any other financial aspects, stock options also have their benefits. For instance, it is much easier for the employees to understand them as they provide equal opportunities for all employees. They also tend to increase personal earnings for each staff member when the company’s share value goes up and thus can act as a motivating factor because each employee will work even more to get more personal earnings. As a result, the company itself tends to get better in meeting and to exceed the customer’s expectations hence attracting and maintaining even more clients. Last, of all, stock options come in handy because some revenue service rules make it difficult for business owners to supply their staff with equities through significant tax burdens. That is why Jeremy Goldstein suggests that the only solution to be able to face the challenges and enjoy the benefits of stock options is by using knock out options. Reason being they have similar time limits, and requirements to the latter and the difference is that employees only lose them when the share value goes below a certain fixed amount. Therefore that makes it difficult for them to lose as the employers can avoid that through canceling when the value remains low for more a week. They also reduce the initial accounting costs for employers and stockholders no longer face the risk of overhangs. Additionally, they result in lower compensation figures thus creating a better picture for shareholders.
Famous for his prowess when it comes to legal matters, Jeremy Goldstein works as a partner at Jeremy L Goldstein & Associates LLC which is a law firm dedicated to offering advice to compensation committees and big corporations. Goldstein has worked with many prominent companies such as Lipton among many others. Jeremy has also been part of significant business transactions and is also the chairman of Mergers & Acquisition subcommittee. He is quite a lucrative and holds several certifications such as a BA from Cornell, JD from the school of law of New York University and an MS from the University of Chicago.
Connect with Jeremy Goldstein on LinkedIn.