Jeremy Goldstein’s point of view on knockout options

Over the years, companies have debated on whether or not to provide their employees with stock options. Many have had to stop the trend owing to the disadvantages while others defend it.

 

The supporter’s point of view

Those who are for this mode of compensation point out the fact that it is the easiest mode for all employees to understand as compared to equities and insurance coverage. Some also argue that the fact that an individual’s earnings increases with an increase in the company’s share value will prompt the workers to put more effort towards improving the company’s share value.

 

When it comes to the taxation rate of corporations, the stock option method is set to reduce the amount that a company has to pay in tax.

 

The antagonists’ points of view

The opponents argue that this compensation style is beginning to be feared by many employees as they are becoming more aware of the fact that a decrease in the stock value may mean that their options would be rendered useless.

 

The other issue is that stock options subject the company to cumbersome financial matters. Finally, there is the worry that decrease in share value would subject stakeholders to an options overhang.

 

The way out

Financial experts have introduced the corporate world to the idea of knockout options. These options can be done away with when the company’s stake value reduces to less than 75 dollars per share and stays that way for a specific amount of time. The options also have a time span after which they expire.

 

Jeremy Goldstein

Jeremy is a corporate attorney with one and a half decades of experience. He has been involved in the transactions of companies like Duke Energy, Verizon, Merc and Chevron among other top corporations. He is a former partner at a prominent New York firm before launching his firm.

 

The Jeremy L. Goldstein and Associates LLC is a firm that is dedicated to offering corporations, executives, management personnel, and governance teams with advice on issues to do with compensation.

 

Goldstein is also a member of the Mergers and acquisitions Society and the American Bar Association and well as the NYU board of professional advisors. He also constantly writes and gives talks on matters of compensation and corporate governance. Learn more: https://twitter.com/jeremy_gold1