Businesses have a lack of trust in the economy, because of its constant change. As a result some companies are axing offering stock options to their employees in part to save money. Employers see three problems with offering stock options. Stock options are tied to the value which can drop at any time, which may not allow employers use their options. Companies are forced to report all expenses that are part of the stock options, which could end up costing the stockholders who could end up with stock option overhang.
Many employees do not favor stock options because their value can change at any given time. The value can be strongly impacted by economic changes. Employees see stock options as a very risky gamble. Stock options are also creating accounting burdens. The costs tied to options often nullify any financial advantages that they offer. There are actually positives for having stock options.
While risky, options are appealing to employees because they are easily understood by everyone. They also are more preferred over bonuses, equities or even extended insurance coverage. With options tied to the company’s value, this encourages employees to work harder and keep the company growing by finding new clients and delivering strong to current clients.
Corporate lawyer Jeremy Goldstein continues to tell companies to consider offering knockout options. He points out that there are many benefits for this type of option. Unlike regular stock options, if the share value falls under a certain amount, the employees will immediately lose them. This way encourages employers to prevent their stock value from falling.
Jeremy Goldstein is partner and founder of Jeremy L. Goldstein and Associates in New York City. He specializes in corporate governance and executive compensation issues. Jeremy Goldstein has accumulated more than 15 years experience in corporate legal matters. Jeremy Goldstein has also overseen many corporate transactions.
Follow Jeremy Goldstein on Facebook.