Over the years companies have been known to halt the provision of stock options to their employees. The main reasons as to why companies refuse to offer this method are:
- Risk of overhanging the stock options by shareholders. This happens when the stock values decrease enormously and businesses still take into account expenses despite employees not been able to run with their options.
- Many employees no longer want to use this option as it has proven to be a risk especially with frequent downturns in the economy.
- The financial costs associated with this option.
To solve these problems Jeremy Goldstein advises companies that want to continue offering this option to its employees to embrace the Knockout strategy. This strategy minimizes expenses and overhangs. This option will offer the same benefits as the stock options, however, if the value falls below a specified amount, the employees lose their options. Accounting costs incurred initially are also likely to decrease as stocks only remain valid for shorter periods of time. The shareholders will also be less worried about overhangs as no one exercises their options below a particular price. Annual earnings are also well reflected as the figures been compensated annually are less.
Jeremy Goldstein advises that using the knockout method ensures that the stocks of a company do not drop below the set value hence giving the employees trust in the stocks. When the firm performs well, the employees are assured of impressive returns. This method does not offer long-term and final solutions to existing problems of the option stocks but it curbs most of the ones associated with compensations. It is of utmost importance that the management of the company reveals that this option is been exercised to the auditors so that they are aware of the effects in book records.
Jeremy Goldstein has been legally advising business for over 15 years. Most businesses consult with Jeremy regarding compensation and benefits for employees as he is a qualified and experienced lawyer. Jeremy founded Jeremy L. Goldstein & Associates LLC and is currently practicing as a partner. The firm focusses on advising businesses and individuals on corporate governance and compensation for executives.
Jeremy Goldstein worked for Wachtell, Lipton, Rosen & Katz law firm as a Partner before he started his own firm. He has had a hand in top dealings with Duke Energy and Verizon among others. Jeremy has a Juris Doctor in Law from the New York University, School of Law. He also has a Bachelor of Arts and a Master of Arts degree from the Cornell University and the University of Chicago respectively.
Visit http://jlgassociates.com/ to learn more.