There was a time when companies would offer their employees stock options as part of their compensation. However, due to several factors, companies stopped offering this option. For one, it turned out to be an accounting nightmare. Also, employees realized that if the market took a downward swing, their stocks would be worthless. Lastly, if the stock did make a dramatic drop, employees would be unable to exercise their stock option.
According to Jeremy Goldstein, there are advantages to this method of compensation. The first advantage is that stock options will result in a smaller tax burden for the company as opposed to other methods. Another advantage is it may cause employees to be more productive because they only make money when the company is doing well.
However, it is possible for companies to offer options. Jeremy Goldstein recommends that companies use what is called the knockout option. They have the same advantages and vesting rules as the other options, but the difference being that employees lose the options when the stocks drop under a predetermined value. This is a win for everyone. The employees are motivated to work hard, and employers are able to give their employees stocks in a manageable way.
Jeremy Goldstein is a partner in is own law firm, Jeremy L Goldstein & Associates LLC. His firm specializes in corporate law. Goldstein was involved in many corporate transactions for large corporations that include Goodrich, AT&T, Bank of America and many more.
Goldstein also is sought out lecturer on the topic of governance and executive issues. He has also published several papers on the subject. Goldstein spends his free time doing charity work for the Make-A-Wish-Foundation and the Fountain House.
For more information, connect with Jeremy Goldstein on LinkedIn.