In the past five years, stock options popularity has been on the decline among corporations and their employees. Most firms’ managements argue that stock options have become too expensive or complicated to implement.
Are they that bad? Well, it depends on how you look at it. Some employees still prefer this mode of compensation in addition to their monthly wages. This is probably because many employees have seen start-ups become multinational companies and mere stock options transforming into fortunes.
Mr Jeremy Goldstein, a partner at the Jeremy L. Goldstein & associates LLC, observes that many corporations are also happy to convert a portion of their employees’ wage into stock options. This is because most corporate leaders feel that employees work harder to ensure that the company grows everyday. A growth in the value of the company means that employee’s stock options are worth more.
To the employees, stock options are only good if the company’s value rises. If the value plummets, the employees suffer losses. As such, more employees prefer other forms of compensation such as a higher salary because the benefits are timely. Companies, on the other hand, avoid stock options because of the high cost of accounting and taxation brought about by the complexity of accounting of stock options.
Jeremy Goldstein argues that there is a need for a more innovative way of compensating employees. A system that shall be able to impress both the corporations and the employees.
In order to solve this problem, corporations need to come up with smart strategies that cater for both the employee and the firm. One that minimize overhang and any expenses associated with stock options.
According to Jeremy Goldstein, the best strategy is adopting a barrier option known as a “knockout”. The vesting requirements and the time limitations are the same as conventional options but they can be lost if the share value of the company drops past a certain limit. Employees can also cancel the options if the share value goes down temporarily.
Jeremy Goldstein has been a business lawyer for more than 15 years. He has dedicated his life to offering sound advice to management teams, compensation committees, and corporations in executive compensation.
To learn more, visit http://officialjeremygoldstein.com/.