Business owner and legal expert Jeremy Goldstein shed some light on the reasons employers have been opting not to provide their employees with stock options. While some corporations are going down that path in an effort to save money, there are many businesses that have other reasons for the decision.
Jeremy Goldstein is serving at the helm of Jeremy L. Goldstein & Associates, LLC, That is a law firm that has been at the forefront in the recent years. The law firm works perdominantly in advising compensation committees, as well as CEOs and other people in leadership. Jeremy Goldstein is working as Partner.
The value of stock options are not set in stone, and so that value might drop easily. That would render employees incapable of using the benefit. Corporations still have to report any expenses, but it can leave shareholders in a state of overhang.
Another reason for curtailing the benefit is due to economic downturns. Many are wary of this method of compensation and view it more as tokens rather than real cash. Employees are also polarized in opinions as many do not consider stock options to hold as much value as simply a higher salary.
On top of the ever-changing nature of stock options, providing them to employees also comes with a great deal of accounting. Not only that but the relevant cost might exceed the benefits of stock options.
Despite the cons, there are also some advantages to stock options as additional wages. A stock option can provide a good incentive for employees to increase their productivity rate as the more the company’s shares rise in value, the more their stock shares will rise in value as well. That is a pretty simple formula that is easy to understand for most employees.
In order to gain that and more benefits, a company can try a strategy called ”’knockout”. To illustrate that, an employee might receive a stock option with five years to it, and it allows them to buy a stock that costs $150 per unit. If the company’s share value, however, drops to, say, below $75 then the stock option goes into a knockout.
Knockout stock options are the same as the conventional type for the most part. They have the same time limit as well as the corresponding vesting requirements. What makes it different, however, is that the employee loses them when the share value of the business drops below a certain amount of value.
Connect with Jeremy Goldstein on LinkedIn.