Jeremy Goldstein Demonstrates How ‘Knockouts’ solve Stock Option Issues For Employers

The offering of stock options to employees is a perk that many companies have decided against in recent years. In a simple sense, companies have discontinued this practice because of monetary considerations, however Jeremy Goldstein has identified a list of other, more complex reasons, that have discouraged companies against these offerings to employees:

 

Devaluation

 

There is always the possibility that a given stock may lose value to the extent of causing it to be impossible for an employee to exercise their options. The business would still be responsible for reporting associated expenses, and shareholders run the risk of seeing their ownership stake become diluted.

 

Employee Distrust

 

Many employees have become more than just a little distrustful of this form of compensation. Historically it has been seen many times that economic downturns can render stock options worthless. Compensation of this sort often times seem to be more of a gamble than repayment for work or services rendered.

 

Accounting Expenses

 

Offering stock options as compensation to employees result in considerable accounting expenses. Many times the cost of accounting exceeds the value of these derivatives. In some cases the added salary that could be given employees if these expenses were eliminated become more valuable than stock options themselves.

 

While the issue of offering stock options to employees can be problematic, Jeremy Goldstein believes there are some benefits to both employers and employees that engage in this type of compensation plan. For one, members of a company can easily understand stock option compensation. Also, this compensation is of equal value to all employees.

 

In addition, stock options are only an increase in an employees earnings if the company in question sees an increase in shareholder value. This gives incentive to employees to give their best in contributing to the profitability of the company that employs them.

 

Jeremy Goldstein believes the perfect solution for the balancing of these pros and cons is found with what is known as a ‘knockout option.’ A knockout option is a type of barrier option that include the same time limits and vesting requirements as conventional options but employees lose these options when a share falls in value past a certain point.

 

For example,let’s say an employee is offered a five year term and is allowed to buy in at $100 a share. With a knockout option these shares would expire if the value of these options fall to $50.

 

Jeremy Goldstein is the go to expert for many corporations when in need of legal advice pertaining to employee compensation. An attorney with over fifteen year experience Jeremy Goldestein received his bachelor’s degree from Cornell University and his Master’s from University of Chicago. Both degrees were in Art History. He then went on to receive his Law degree from New York University School Of Law.

 

Jeremy Goldstein has aided many top companies in some of their biggest transactions. Among these companies are AT&T, Chevron, Verizon and Bank One. Goldstein is also the director of the non profit Fountain House.

 

Read more at https://thereisnoconsensus.com/jeremy-goldstein-explains-knockout-options-help-employers/.

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