Jeremy Goldstein’s solution to stock options
Many companies are now shying away from giving their employees stock options. Some do it to save money while others do it because employees have grown wary of it. Having realised that if the company takes a down turn they will not be able to exercise their stock options, many employees prefer an increase in their salaries. The accounting burden that comes with giving employees stock options also keeps companies from offering stock options.
Giving employees stock options is not entirely a bad idea. It has its advantages. Since employees are directly affected by the success or failure of the company, they put in more effort in ensuring customer satisfaction. As opposed to giving employees equity, giving them stock options gives lightens the tax burden of a company. Learn more: http://officialjeremygoldstein.com/
Since the advantages of stock options outweigh its disadvantages, Jeremy Goldstein, the founding partner at Jeremy L. Goldstein & Associates, LLC, encourages companies to embrace the use of knockout clauses. A knockout clause is a barrier option has the same conditions as a stock option. The only difference is that if the shares of the company drops below a specific point, then the employees loose them. This prevents employees from having stock options that are not useful to them.
However, it is pointless to give employees options only to take them away when the shares go down for a few hours. Therefore, it is important to put a specific duration- at least a week. The result of including a knockout clause includes lower executive compensation and figures on yearly disclosure documents. This not only looks good to the investors but also allows for accurate earning reflections.
Jeremy Goldstein is a partner at Jeremy L. Goldstein & Associates. Before founding his own firm, he was a partner at Wachtell, Lipton, Rosen & Katz. Jeremy has been involved in many large transactions including the acquisition of Goodrich by United Technologies and the Dow Chemical Company/Rohm and Haas Company. He is the chair of the Mergers & Acquisition Subcommittee of the Executive Compensation. He is also a frequent speaker on issues concerning corporate governance and executive compensation.