According to Jeremy Goldstein, some firms prefer providing their employees with stocks instead of money compensation. One of the reasons is to save money. However, the option might end up being complex, and problems can make firms curtail such kinds of benefits. For instance, the value of the stock may drop down significantly. This will make it difficult for employees to exercise the options they have. Similarly, the stockholders will also face the risk of having overhanging options. Employees are also wary of this kind of compensation method. They understand that at some point economy may go down and their options will be rendered worthless. In that case, stock options are considered to be casino tokens and not cash. Additionally, the compensation can result in issues relating to accounting burdens.
Nevertheless, stock option as a method of compensation still has its advantages. It is preferred over other options such as better insurance coverage, equities, or additional wages. Moreover, the beneficiary can boost his or her earnings if the value of corporation’s share rises. This will encourage employees to give priority to the success of the organization. The staff members will also work hard to satisfy the needs of the existing customers, develop innovative projects, and attract desirable clients as well. The best solution is to adopt good strategies regarding stock options, and one of the best options is known as knockout. It has similar vesting requirements and time limits as the conventional methods. However, employees can lose their shares if the value falls below the defined amount. For example, an employee can receive an option of buying a stock, which lasts for five years at $150 per year. If the share is provided under the knock-out option, it will expire when its value drops below $75.
About Jeremy Goldstein
Mr. Jeremy Goldstein is one of the associate partners at Jeremy Goldstein and Associates Law Firm. As a boutique law company, JLG & Associates is dedicated to advising CEOs, compensation communities, management teams, and executive teams on issues relating to compensation and corporate governance. Before he established his law firm, Jeremey Goldstein was an associate partner at Rosen, Lipton, Wachtell & Katz Law Firm. He has been involved in several corporate transactions in the past ten years of his career life.
Jeremey Goldstein is also a distinguished author and keynote speaker. Most of his writings are about issues relating to executive compensation and corporate governance. Examples of his written works include the Legal 500. He is also a board member of PAB (Professional Advisory Board) of the NYU.
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