The popularity of stock options as a reward mechanism has been on the decline across many corporations. According to Jeremy Goldstein, it is an expensive method of compensation, and thus some companies have dropped it to save on costs. The business continues to report the expenses associated, even when the stocks are not exercisable. Further, the costs associated with them may outweigh the benefits. Employees, on the other hand, have been skeptical about stock options due to the possibility of loss of exercisability, resulting from a significant drop in stock value. In addition, the staff members prefer higher salaries to stock options, and would rather have this compensation method eliminated.
Stock options are not all doom and gloom. Staff can easily understand stock options due to their simplicity. Further, this type of compensation increases personal wealth when the value of the shares increases. Therefore, staff members are driven to prioritize the company’s success by working harder, becoming innovative, and reaching out to desirable customers. In addition, stock options are easier to provide compared to shares due to their simpler rules and lower tax burdens on the company.
Jeremy Goldstein, an expert on compensation matters, shares his insights on the best option to use in place of the stock option. This is the knockout -option. His insights are that; companies that want to continue using this compensation strategy should ensure that minimal costs are incurred, by curtailing the initial and ongoing expenses. Secondly, companies should consider the knockout options, which employees should forfeit if the share price falls below a pre-set minimum. This would encourage the employees to work harder, in order to keep the share prices high so as not to lose the value. In addition,Jeremy Goldstein points out that, knockout options eliminate most obstacles associated with the stock option.
Jeremy Goldstein is a highly sought after business lawyer on legal matters, on compensations.Through his experience, he mentors young lawyers at Jeremy L. Goldstein & Associates LLC on compensation and corporate governance issues. As a result, he has been invited to oversee some of the largest transactions, in the corporate world, particularly in mergers and acquisitions over the past decade.
Connect with Jeremy Goldstein on LinkedIn.