As the economy continues to remain unstable, companies across the board are beginning to slash stock options from executive compensation benefits packages. Some claim they are doing this to save money. However the primary reasons that have convinced corporate executives to reduce and eliminate these options are three fold:
- When the stock value falls significantly, employees will not have the time or ability to sell their options. However, company accountants still have to report all related expenses, while opening up shareholders to the risk of option overhang.
- Employees have become uncomfortable with this type of employee compensation, which is made to reward staff for their efforts made at performing their duties. Employees nowdays are aware how much the economy dictates the stock market which can in turn influence options to lose their value. Employees see these benefits similar to casino tokens as opposed to real cash.
- Stock options are an increased burden on accountants. When you trade in derivatives, the costs may negate any possible gains. Employees would rather have pay raises instead of options. If employers cut options from the benefits packages, they could afford them to give wage increases.
Personal gains are increased only when the value of the company’s shares are increased. As employees understand that their options depends on the company’s success, they will work harder at making the company more successful. Employees will draw in new clients as well as ensure current clients are satisfied. Some employers have contemplated offering stock equities instead of options. Corporations are hesitant because of the strict IRS regulations. There are possible solutions to this complex problem of stock options. Learn more: https://www.americanconference.com/executive-compensation-836l17-nyc/speakers/jeremy-goldstein/
Corporate lawyer Jeremy Goldstein believes that “knockout” options are the best options. They are similar to regular options, but when the value drops under a certain amount, employees lose the option. This kind of option eases the stress on accountants. With this kind of option, accountants only spend a little time making calculations.
Jeremy Goldstein is a New York based lawyer with more than 15 years of experience. He specializes in executive compensation and corporate governance. He founded his own boutique law firm Jeremy L. Goldstein & Associates. Jeremy Goldstein has been influential in many of the country’s top corporate transactions involving companies such as AT&T, United Technologies, Chevron and Goldman Sachs. Jeremy Goldstein serves on the board of several charitable organizations including the Fountain House, which helps people recover from mental illness.