Whether to save money or for reasons too complicated to explain, employers and corporations have been reducing their employee’s privileges in receiving stock options. There are multiple problems with this issue.
Jeremy Goldstein specializes in speaking about issues with executive compensation and corporate governance. He lists as one of the leading lawyers who specialize in executive compensation. He is also an active member of the New York-based Make-AWish charity which dedicates its efforts to help people recover from mental illness.
Goldstein, who received his J.D from University School of Law in New York, has been working in the area of business law for over 15 years. He had established his firm based in New York and served on the prestigious law journal boards. He shared his views on the matter of stock option compensation, and the implications the reduced benefits have on the benefit of the businesses.
As Jeremy Goldstein explains, compensation with stock options can become a substitute for insurance coverage or equities. What employees need to understand is that stock options provide equal value to all of them. In case that the company value increases, so do the personal earnings of the employees. This way, the staff feels the urge to think about the success of their company. It could result in better customer service, innovation and more effort towards attracting clients.
With specific rules that the Internal Revenue Service imposed, it becomes a lot harder for companies to supply their staff with equities. Also, corporations could face additional taxes for providing shares instead of options.
Jeremy Goldstein sees the solution to this issue. With the right strategy, companies should take the right steps to reduce overhang and expenses. The benefits a company could gain are worth the effort. Ultimately, knockout stock options could be the best solution for the business owners, since employees can lose them if they fall below a certain amount.
Knockout options protect companies and investors who are not members of the staff since no one can use options that threaten with overhang.
Jeremy Goldstein agrees that temporary plunges shouldn’t be a reason for companies to eliminate knockout stock options. Only plunges longer than one week, according to Goldstein, are a good enough reason to cancel the options. The knockout mechanism also serves to lower the initial accounting costs with volatile stocks, keeping the options valid for a shorter period than usual.
Connect with Jeremy Goldstein on LinkedIn.