Employee stock options are one of the great ways to retain the best talent in a company. However, some stock options can pose a problem for both the employee and the employer when the stock of a company drops. Financial expert Jeremy Goldstein explains an ingenious new way to structure stock options which can benefit both parties.
First of all, what are the problems with regular stock options? When a stock drops, the stock options become worthless for the employee. And the company stockholders have to deal with the cost of the option overhang. Secondly, many employees don’t like stock options because they know that their fortunes are tied to the stock market. Finally, options are an accounting headache that can sometimes be more trouble than they are worth.
In a recent article, Jeremy Goldstein laid out his idea for a better way to compensate employees through “knockout” options. The structure works like this, the options have the same time and worth value as regular options. However, if the company’s stock falls below a certain price, for a certain amount of time, then the stock option disappears.
To prevent the stock option from disappearing from a momentary dip in the stock, the elimination of the stock option would only take effect after a one week period of the stock’s fall under the target price. The overall benefit of knockout options is easier accounting and less liability for the stockholder. Also, the knockout options give employees an incentive to keep the company’s stock price high.
Jeremy Goldstein is one of the premier legal experts when it comes to employee compensation. With over 15 years of experience, Mr. Goldstein has helped many companies structure the compensation of high-level executives. Some of the company’s Jeremy Goldstein has worked with include Duke Energy, Merck, Bank One, Verizon, and Chevron.
Currently, Mr. Goldstein is a partner at the law firm, Jeremy L. Goldstein & Associates, New York. The boutique firm specializes in advising on executive compensations which includes working with compensation committees, CEOs and senior management in matters of salary, benefits and overall employee and executive compensation.
Mr. Goldstein received his Bachelors of Arts degree from Cornell University. Afterwards, he completed a Masters of Art program at the University of Chicago. Finally, he received his Juris Doctor degree from New York University School of Law.
Visit http://jlgassociates.com/ to learn more.