Experts are questioning the trend of companies ending their stock options. Some companies say they are doing it to save money; some are providing more complex reasons for ending stock options as a secondary compensation method.
Jeremy Goldstein is a business lawyer that currently holds positions at several institutions and law firms. He is the chair for a mergers & acquisitions subcommittee at the American Bar Association, as well as a partner at his own law firm. Goldstein founded Jeremy Goldstein & Associates LLC after the recent recession, and he decided to put his fate in his own hands.
Jeremy Goldstein often shares his thoughts in print. His writings cover a large variety of subjects including tax law, proper compensation, and now knock-out options: a new idea in stock options.
Goldstein argues that companies may want to reconsider ending stock options. He claims that the pros far outweigh the cons, and companies can benefit greatly from reemploying stock options as compensation bonuses to employees. Mainly, if stocks are going up in value, employees will experience increased morale. This leads to a more productive work force and a more efficient company.
When you offer stock to employees, you have an excuse to raise stock prices. The influx of buyers creates a rise in market value. This is another advantage of offering stocks to employees.
There are a few disadvantages as well. If the stock price of a company falls it could lower morale in the company.
A new idea has been floating around the business world for a while now. This new idea is called knock-out options. This is when the stocks being offered to employees have a limit to how much they can grow. When the stock hits this limit, the employee who purchased the stocks must cash out to get their maximum profit. This is a great way to offer employees stocks.
The knock-out plan eradicates the worries of current investors as well. Existing investors know that the employee’s stock options are temporary and their market share will be minimally changed.
Jeremy Goldstein urges companies to reconsider their stance on stock options. Learn more: http://jlgassociates.com/