Corporations have, in recent times, decided against giving stock options to employees. This is a decision not only guided by the fact that these firms want to save money but one governed by so many other reasons. The following is a list of some of this causes:
- A drop in stock value may make it difficult for employees to put to use their stock options. Businesses, however, need to make public some of the expenses that may result from this. They also need to remind stakeholders that they face the risk of having their options overhang.
- Employees become suspicious of this compensation method. They know that any toll on the economy impacts negatively on their options.
- Options may result in an overload on the accounts. Employees still prefer high salaries to stock benefits. They consider them, high wages, to be more beneficial or attractive than stock options.
Of what advantage are stock options then to the employer? Jeremy Goldstein provides this answer to us.
Employees still relate to stock options better. Although a number of them prefer high salaries to stock options, most of them still do value stock options. They view them as an equating factor, that is, something that places all of them at the same level.
Consequently, options can only be of benefit to the employees if the value of the company’s stock increases. A company’s stocks can only increase if the firm experiences tremendous success. Employees are, therefore, motivated by this fact to work harder.
The Internal Revenue Service regulations make it hard for the corporation to give equities to their employees.
What then is the solution to all this? Jeremy Goldstein is also of much help in this, matter.
Employers should put to use the ‘knockout,’ a barrier that shields the corporation. This knockout technique states that an employee loses their stock options if and when the value of this stocks falls to reach some amounts. The knockout method also requires that the stock options have a time limit, for example, five years.
About Jeremy Goldstein
Jeremy Goldstein is an executive compensation expert with a J.D from the New York University Law School. He is one of the pioneers of Jeremy L. Goldstein & Associates LLC Mr. Goldstein writes, and public speaks on corporate governance and also offers advice on executive compensation. Before forming his law firm, he was part of the Wachtell, Lipton, Rosen & Katz.
Goldstein has overseen processes such as the buying of Goodrich by United Technologies among many other things. He is also a Fountain House, a charitable non-profitable organization that seeks to promote awareness of mental illness.
To learn more, visit http://officialjeremygoldstein.com/.