Jeremy Goldstein says there are three major reasons why companies have stopped providing stock options to employees. First, the company’s stock might fall to levels where employees can never exercise their options. Second, employees no longer want options due to their high risk and volatility. Finally, this compensation method does not seem productive at achieving employee happiness nor is it desirable for accounting purposes. In many cases the overhang costs outweigh the benefits. Learn more: https://www.slideshare.net/JeremyGoldstein14/aci-compensation-committee-presentation-2016
There are several advantages to options for example; every employee gets something of equivalent value. Options motivate employees to increase productivity of the entire organization as their options only increase in value when the company does well. Jeremy Goldstein states that companies that provide options have lower tax burdens as well.
The problem doesn’t seem to be the concept, but rather the execution. Companies must have an efficient option strategy in order to reap the benefits and minimize the costs. Jeremy Goldstein’s idea is to use “knockout” barrier options. Knockout options are lost if the stock value falls below a specified point. This encourages employees to make sure this never happens. The costs are minimized, tax burdens are lowered and employee motivation is increased. The lower executive compensation looks better to shareholders as well.
Companies should seek the advice of Jeremy Goldstein before implementing an options strategy. He is a partner at his own law firm Jeremy L. Goldstein & Associate LLC. a firm dedicated to advising organizations on compensations strategies and corporate governance. Mr. Goldstein has many years of experience in corporate transaction, mergers and acquisitions and executive compensation strategies.
Jeremy Goldstein has almost two decades of experience since his acceptance to the BAR in 1999. Goldstein has been involved in some of the largest corporate mergers including, United Technologies takeover of Goodrich.