Companies in all different industries have begun eliminating stock options from employees benefit packages. Some companies are strictly doing it to save money, while others are being influenced by many different complex reasons. There are a few issues that have persuaded companies to reduce these benefits.
- When the stock value falls drastically, employees will be able to execute their option. The corporate bookkeeper is forced to report all related expenses, opening up shareholders to the risk of “option overhang.”
- Employees have expressed their concern with this type of compensation. Employees know that the economy dictates how the stock market acts, including making options worthless. When the options become worthless, employees see this compensation as free play in casinos as opposed to receiving cash.
- Accountants forced to track options. When they trade in derivatives, the costs can often outweigh any positive gain. Executives would rather receive raised salaries instead of options. If employers decided to eliminate options from employee benefits, they could then afford to offer pay increases.
There are advantages to offering stock options. Some employees prefer stock options because they can easily understand how they work. Also, a stock option means each employee receives similar valued type of compensation (http://clsbluesky.law.columbia.edu/author/jeremy-l-goldstein/). Personal earnings grow only when the company’s shares increases. This causes employees to work harder at increasing the company’s success. Employees will find creative ways of finding new customers and keeping their current customers satisfied.
Business lawyer Jeremy Goldstein recommends knockout options to companies who want to offer options. They are similar to regular stock offerings, in that they both have similar time limits and vesting requirements. Employees with knockout options will lose their benefits when the share vale drops below a certain designated value. Knockout options eliminate some of the problems tied to standard stock options. Jeremy Goldstein suggest employers meet with auditors who are aware of possible dangers staff members might face.
Jeremy Goldstein is both founder and partner of Jeremy L. Goldstein & Associates LLC. Goldstein has more than 15 years experience as a lawyer specialized in business matters including executive compensation and corporate governance. Jeremy Goldstein has been influential in significant financial transactions involving several major companies including AT&T, Chevron, Merck, Goldman Sachs and Bank of America Corporation and Verizon. Jeremy Goldstein currently serves on the board of several organizations including the nonprofit Foundation, which is an organization that helps people recover from mental illness.