In the past few years, several corporations have opted not to provide their employees with stock options. It is true that most companies took that action for the sake of saving money. Nonetheless, there are several underlying reasons which are even more complex. There are three major problems which encourage companies to cut off such benefits.
The first reason is that the stock value might drop drastically and hence make it difficult for employees to exercise their options. However, businesses are still required to report their related expenditure, and on the other hand, stockholders are exposed to the overhang risk option.
The second reason according to Jeremy Goldstein is that options lead to substantial accounting burdens. Relevant costs may reflect the financial merits of such activities. However, employees do not always consider these benefits as valuable compared to the higher wages that their employer would have paid if it was not eliminated.
The third and final reason is that a majority of employees seem fatigued by this kind of compensation method. They understand that the uncertain nature of the market can anytime render options useless.
Despite the disadvantages, this form of compensation is better compared to equities or additional wages. The reason is that it simple and designed for employees to understand stock options. Also, options only increase earnings if the share value of a corporation increases. Workers will be motivated to work harder to satisfy existing customers and attract desirable clients to come up with innovative services.
Jeremy Goldstein is a partner at Jeremy L. Goldstein & Associates LLC, a law firm dedicated to providing advice to CEO’s, committees, management teams as well as governance and corporate matters. Before he founded his firm, Jeremy Goldstein was a partner at another law firm, Wachtell, Lipton, Rosen & Katz. He has vast experience in large corporate transactions and has been involved in major business deals such as the acquisition of Goodrich by United technologies.
Besides that, Mr. Goldstein is also the chairman of various committees and writes in various business journals. He is a member of the professional advisory Board of the NYU Journal of law and business. He has over the years successfully represented several corporations in major transactions and court cases. When it comes to his educational background, Jeremy Goldstein has a J.D from New York University, School of Law. He also has an M.S from the University of Chicago and a BA from Cornell University.