Stocks options have in the recent past been shied away by most employers as a way of compensating their staff. This trend could be attributed to reasons, such as a significant drop in stocks value that makes employees unable to exercise the options. Learn more about Jeremy Goldstein: https://corpgov.law.harvard.edu/contributor/jeremy-goldstein/ and http://files.ali-aba.org/pdf/Goldstein%20new%20BIO.pdf
It also causes a risk of options overhang. Most employees do not agree to this kind of compensation as they are aware of the risks associated with downtimes.
The Knockout Option
The stocks options can be advantageous in several ways. Its simplicity allows employees to understand the value associated with it. It motivates them to work harder towards increasing the shares value because they understand it will increase their earnings. Compared to shares, stocks options have a lesser tax burden.
Employers can enjoy these advantages by adopting a barrier method named the knockout strategy. One characteristic of a stocks option is that if their share value drops below a certain amount, employees lose them. In such a situation, employers can cancel the benefits if the prices remain down for about a week.
Employers are also advised to replace expired options after about six months and the costs treated as repricing expenses. The initial costs associated with this strategy are relatively low especially when stocks are volatile. The knockout option method reduces the risk of overhang to other investors. It also reduces the amount of executive compensation shown in accounting books at the end of the year.
About Jeremy Goldstein
Jeremy Goldstein is a highly experienced attorney in business law. He is a partner at Jeremy L. Goldstein & Associates LLC. Jeremy Goldstein previously worked for Wachtell, Lipton, Rosen 7 Katz as a partner and Shearman & Sterling LLP as an associate.
Jeremy Goldstein is an alumnus of the New York University School of Law where he earned his Juris Doctor degree. He also attended Cornell University where he attained a Bachelor of Arts degree in history. White Pages revealed that Jeremy Goldstein did his masters at the University of Chicago.