In a tight job market and with employers looking to keep budgets tight, employee stock options can be questionable benefit for employers to offer. When stock prices drop the shareholders may end up with option overhang, after the recent recession new employees are often wary of stock options, and there are a lot of accounting costs associated with stocks. But stock options are not quite so simple.
According to Jeremy Goldstein, while these are valid disadvantages, stock options are still a valuable tool for employees because they are easy for employees to understand and they are an equal value to each employee receiving them. Also, it is a tangible way for employees to see their impact on the company. As they work hard and become more successful, the stock prices increases, adding wealth to the employee. Stock options are less regulated by the IRS then equities. So, what should a company with it’s eye on the bottom line do?
There is a choice the bridges these two sets of outcomes. Jeremy Goldstein recommends a “knockout.” This policy allows companies to set a stock price threshold. Should the price drop below a certain level and stay there over a longer period of time, the option for employees to buy stocks would expire. This policy also helps keep accounting costs low in a volatile stock market. And this benefit keeps executive salaries lower. The “knockout” keeps options open for employers.
Jeremy Goldstein has been a business lawyer for over fifteen years. Before launching his own firm, he worked as a partner at Wachtell, Lipton, Rosen & Katz. During the last fifteen years, he has had the privileged of working with some of the most prestigious companies, including Duke Energy, Verizon Wireless, and the Miller Brewing Company.
Jeremy Goldstein graduated from Cornell University before getting his master’s from the University of Chicago, and attending the New York University School of Law. He has been recognized by The Legal 500 and Chambers USA Guide to America’s Leading Lawyers for Business. Learn more: https://bestlawfirms.usnews.com/profile/jeremy-l-goldstein-associates-llc/overview/70073