The number of companies offering stock options as a benefit has been on the decline. Bolstering the company’s bottom line could be one reason, but there are others.
The value of employees’ shares can be reduced by option overhang the reduction in a stock’s value because more shares were issued. Option overhang creates an impediment to option holders’ ability to exercise their options.
The vicissitudes of the market cause employees to doubt the value of stock options.
Stock options increase accounting costs. Employees may view stock options as an impediment to a higher rate-of-pay.
Attorney Jeremy Goldstein explains how offering stock options can work to an employer’s advantage.
Stock options can be the best of all benefits. Better even than higher wages or insurance coverage. Stock options are easy to understand and are of the same value to all employees.
The issuance of stock options is a great motivator. Employees work harder because the companies financial future is more directly tied to their financial future.
When it comes to compensation packages for a corporation’s upper-echelon IRS regulations can impede the issuance of equities. Providing shares rather than options may increase the amount a company pays in taxes.
Jeremy Goldstein suggests the following solutions to the pitfalls of stock options. A corporation offering stock options must have a plan in place to counter option overhang and the costs of offering stock options.
As a means to that end, Jeremy Goldstein recommends a type of stock option known as a “knockout“. This type of safeguard assures employees won’t be left with worthless stock. If the value of an employees options falls below a predetermined value the options are rendered void.
Attorney Jeremy Goldstein specializes in answering questions that corporations have about employee benefits. He has over 15 years of experience in his field and is a partner at Jeremy L. Goldstein & Associates LLC.
His educational background includes a J.D. from New York University School of Law, an M.A. from the University of Chicago and a B.A. cum laude and with distinction in all subjects from Cornell University.
He is chair of the Mergers & Acquisition Subcommittee of the Executive Compensation Committee of the American Bar Association Business Section. Both “Chambers USA Guide to America’s Leading Lawyers for Business” and “The Legal 500” have recognized Jeremy Goldstein as one of the nation’s top attorneys in the field of Executive Compensation Law.
Visit http://jlgassociates.com/ to learn more.