According to Jeremy Goldstein there are plusses and minuses to companies giving stock options to their employees as a form of compensation. Nowadays fewer companies are doing this for a variety of different reasons.
There are three main reasons companies are more hesitant to give employees stock options. The first reason is that the value of the stock could drop to the point where employees cannot exercise their options. When this happens companies still need to report the expense, though, which results in what is called option overhang. Another problem is that more employees don’t want stock options and would instead prefer to be paid more. Finally, accounting for stock options is quite complicated.
There are advantages to offering stock options as well. First, it is easy to learn about stock options and how they work. Offering stock options also helps incentive employees to work harder so that their stock increases in value. Also, offering stock options can reduce the tax burden that the company has.
The best option, according to Jeremy Goldstein, is offering what’s called a “knockout” strategy. This type of strategy makes the stock options disappear if the value of the stock falls below a specific amount the company sets. The low value that the stock hits is usually set for a period of time, such as a week, rather than instantly taking effect when the stock value crosses the specified amount that cancels the options.
Jeremy Goldstein operates an independent law firm in the city of New York. He has been an attorney for over 15 years and specializes in employee benefits. He earned his law degree in 1999 at the New York University – School of Law. He also holds a masters in art history that he acquired at the University of Chicago.
Before establishing his own law office Jeremy Goldstein was a partner at another New York law firm, Wachtell, Lipton, Rosen & Katz. He is especially well versed in executive pay and compensation. His legal advice is often sought during mergers and acquisitions which can have a large impact on executive compensation packages. When these occur Jeremy Goldstein advice is sought by CEOs and compensation committees which he advises on legal compliance.
Among the large companies that have sought Jeremy Goldstein’s legal advice are Goldman Sachs, Bank of America, and the Dow Chemical Company. He was also involved in other M&A events such as when South African Breweries bout the MIller Brewing Company.
Follow Jeremy Goldstein on Facebook.