Jeremy Goldstein: Why businesses need to choose good compensation methods

Stock options are a popular employees’ compensation method that has been used in the corporate sector for a long time. It is a method that has been used to get the most out of workers in an organization. Stock options give workers in firm ownership in the firm. They too feel that they have something to gain when the company does well. So that they do not lose their ownership, they will work very hard for the good of the company. Workers compensation is seen as one of the best initiatives a company can attempt to boost its performance. Workers are a critical part of a business and making sure that they are part of the growth in a company is a critical thing to do.


Stock options, however, has had problems in their application in the business environment. They have undesirable effects which affect the business negatively. Stock options are an accounting burden to the company when the prices of the stock have fallen below certain levels where the employee cannot execute them. The company is left with the duty of accounting all the stock, and this is an extra expense to the company.


Earning per Share incentives method


Apart from stock options, there are other compensation methods. Earnings per Share is a common method that is based on the performance of the company. EPS directly affect the stock value of a company. This means that higher earnings per share value will lead to a higher stock value which will, in turn, attract investors in a company.


The EPS method, however, has some disadvantages. First of all, it is not fool-proof. It can be manipulated to suit the needs of the higher management in a business. Since it is performance-based, the executive can change the metrics for determining the value. They can use this trick to create a false narrative about the company’s performance. They can also manipulate the metrics to cause favoritism.


Although EPS has an impact on the business model of a company, it needs to be used for short-term growth. Over a long time, it might not have any good impact. Learn more:


Jeremy Goldstein is a corporate lawyer who details with workers compensation. He has a boutique law firm in New York called Jeremy L. Goldstein & Associates. Through the law firm, he is working with corporations in the country to develop governance policies that which increase productivity in the firm.


Jeremy Goldstein advocates for the knockout option as a replacement of the stock options. Knockout options eliminate all the negative effects of the stock options at the same time ensures that the advantages that the stock option bring are not eliminated. The incentives that workers enjoy will still be available. Knock out options expire after prices fall below certain levels.