Jeremy L. Goldstein’s Solution to Employers on Stock Options
Jeremy L. Goldstein is the founder and a partner of the Jeremy L. Goldstein & Associates, LLC. He studied law in New York School of Law and later on acquires a Master’s degree from the University of Chicago. Jeremy used to work in a New York law firm before starting his own firm in 2014.
His law firm is well known for its expertise in dealing with corporate governance issues and executive pay. Jeremy L. Goldstein & Associates LLC, offers related advice to CEOs, corporations, compensation committees and management teams, whenever such issues arise.
In his law firm, Goldstein has worked with big companies such as Duke Energy, Chevron, Bank One and Merck, Verizon among others.
Looking at how several companies have eliminated the stock options providence for employees, a number of reasons could have contributed to it other than just saving money.
Mr. Goldstein sheds light on the main three reasons for options elimination.
- A major drop in the stock market may be a limiting factor to employees exercising their options. While this is the case associated expenses incurred by a business must be reported, risking stakeholders to option overhang.
- These compensation methods no longer seem worthy to most employers, especially with the frequent economic falls.
- Employees are more interested in the raised salary they may receive once these benefits are scrapped other than the benefit themselves.
Equities provision for employees may become more complex for Internal Revenue Services, especially when the top executives have a compensation package. Providing of shares in a business only projects them to more taxation compared to when options are being provided.
According to Goldstein, adopting the right Strategy that will help reduce overhang and prevailing expenses will enable a company to be free of many costs. Applying a knockout, which a barrier option is the best solution. Employees lose their options when the share value drops below a certain amount. Rather than eliminating the options employees can just cancel the options which remain low for a week or so to avoid the loss.
Overhang threats are not viable to non-employees thus fewer worries for stakeholders. Knockout ensures that a corporations stock value does not fall to risky levels solving the greatest barrier, though not solving all. However, involving an auditor in the process is important, says attorney Goldstein, the over 15 years business lawyer.
In this current period, corporations have come up with a plan of saving money by not providing stock options to employees. Even if the businesses claim that money saving is the real reason, there are other reasons which are stated by Jeremy Goldstein. These reasons include:
- There may be a drop in the value of the stock hence it would be tricky for the employees to use these options.
- Many employees have known the dangers of these stock benefits. They are aware of the economic decline hence making the options worthless. These options resemble gambling at some point.
- Stock options lead to accounting afflictions. The cost at the end may make the financial status of an employee worthless. The main aim of an employee is to get a good salary at the end of the month.
- Stock options lead to additional wages to an employee salary. There is also the addition of insurance coverage and equities. The employees understand all about stock options hence can efficiently manage.
- If there is a share increase in an organization, the personal income of an employee is likely to be more. These can encourage the employees to work hard to make sure the company achieves its best towards the customers.
- According to Jeremy Goldstein, some companies find it hard to give equities because of the internal revenue service rules. Giving of shares is found better compared to providing options.
The company may want to give the benefits to the employees, but they have to do these and at the same time eliminate excessive costs.
The answer to these is the use of knock out barrier option. In this strategy, the employees still receive the stock options still retaining their original features, but they can lose them if the employee share reduces to certain limits.
It may not solve all the issues but is usually the recommended one.
Jeremy Goldstein was the founder of Jeremy L. Goldstein & Associates LLC. It is in this firm that all the critical meetings and all legal activities are performed.
Jeremy Goldstein has been involved in managing the teams, advising the compensation committee and also he acts as a CEO.
Jeremy Goldstein has published many articles regarding the law, companies, and employees related issues. Shareholder Activism and Executive Compensation is one of the many articles Jeremy has published advising the organizations on issues of shares and equities.
In conclusion, Jeremy has extensive knowledge when it comes to the law field. In case an organization has issues on shares, stock options, equities and others, they should get advice from him.
It is advisable for both business managers and employees to read his articles to gain a clear understanding of the company-employee relationships.