Several corporation no longer offer their employees with stock options. Some companies took this deliberate step to lower expenditures, however there are three main challenges that necessitated implementation of this latter decision.
Firstly, stock may potentially drop and limit employees from tapping into their option. This scenario may result to stockholder option overhang. Secondly, several employees are wary on this method of compensation. Economic eventuality sometimes may make the options of employee worthless. Lastly, options are tedious to deal with and often result to accounting burdens.
Even with the above stated cons, this type of compensation is sometimes preferable for extra wages, better insurance cover and equities. The options make it easier for most staff members to comprehend stock options.
Additionally, options can potentially boost personal earnings when the shares of the corporation rises. For this reason, employee may sacrifice the success of the company by only satisfying the existing clients and developing innovative services.
The decision on whether to use options or not lies on the company. When using the options methods, necessary measures should always be taken to decrease cases of overhang and cut on ongoing and primary expenses. Knockout is a type of barrier option that offers the best solution to most challenges that comes with options. Knockout does not mitigate all problems but rather eradicates major constraints associated with options.
Jeremy Goldstein serves as a partner at Jeremy L. Goldstein & Associates, LLC. He has over 15 years of experience as a business lawyer. This boutique law firm offers an array of services to its clients including advisory services to compensation committees, management teams, chief executive officers, corporate governance.
Jeremy Goldstein attended New York University where he majored in Law. Apparently he has mastery of skills in corporate governance, executive pay, mergers and acquisitions. Jeremy Goldstein personally played key roles in transactions involving Chevron, Duke Energy, Verizon, and Bank One among others.
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