Jeremy Goldstein: Remember knockout options

Companies of all sizes, have stopped offering employees stock options as part of their benefits packages. Some companies have done it, simply to save money. Other companies have been convinced to stop for more complex reasons. The main reasons brought up by corporate executives involve several key issues. Learn more: https://www.slideshare.net/JeremyGoldstein14/

 

  1. As the stock value experiences a sudden decline, employees will not have enough time to execute or sell their stock options. Also, company accountants are required to report all related expenses, while also opening shareholders to the risk of option overhang.

 

  1. Staff have become uncomfortable with this form of compensation. They now understand that the economy can dictate stock market events that can cause options to lose their value. When the options lose value, their benefits become like free play promotions that are at casinos, as opposed to employees receiving real cash.

 

  1. Corporate bookkeepers are forced with more work and having to keep track of options. When companies trade in derivatives, they are faced with costs that may negate any positive growth. High paid executives prefer increased salaries as opposed to options. Executives could afford to offer pay increases, if they eliminated options from the benefits package.

 

Despite the difficulties and criticisms, there are some companies that would rather continue to offer stock options over pay raises or other benefits. Some company executives prefer stock options is because the employees can easily understand how they work. Plus all employees receive same type of compensation. An employee’s personal gains only increase when the company’s share value rises. When employees learn that their options depend on the success of the company, they find a way to attract new clients and work hard at satisfying current customers. When employees offer stock equity instead of options, they may face tough Internal Revenue Service regulations.

 

Corporate lawyer Jeremy Goldstein offers up the solution of knockout options. They are similar to their counterparts but lessens the stress and costs in the accounting office. The accountants no longer need to spend hours making calculations since the options are only valid for a short period of time.

 

Jeremy Goldstein is the co-founder of the boutique law firm Jeremy L. Goldstein and Associates LLC, which specializes in corporate governance and executive compensation. Jeremy Goldstein has more than 15 years in the legal field specializing in business issues. Jeremy Goldstein has been heavily involved in several major US company transactions.