There many companies that offer stock options as a way of compensating their workers. Most companies prefer this form as opposed to the traditional ones since it has some extra benefits that it brings to the company. The biggest benefit of using this method is that the company is likely to benefit more as employees will try to apply more efforts in their work so that the stock option value may increase. This means that the more returns a company earns, the more employees will earn. To explain this situation we will look at the work of Jeremy Goldstein, an accomplished associate who works on corporate governance issues as well as compensation programs for corporations.
Jeremy Goldstein has over 15 years of experience. For all this time he has been giving advice to corporates, business executives, managers, and CEOs on the best ways of implementing stock options as a compensation program. The stock options program is advantageous in that it instills the discipline in employees to ensure that the company succeeds. The more the company succeeds, the more they will benefit by having a better compensation program. So, it is proper to say that stock options can be a morale booster for employees.
However, Jeremy Goldstein contemplates of a situation when this plan might not work as it is supposed to. In case the value of the share drops significantly, the shareholders will be exposed to an overhang. To prevent such problems, Jeremy Goldstein offers a solution whereby, a stock option known as the “knockout” option will be implemented to cushion stakeholders from effects of overhang.
Knockout options have the benefit of allowing companies to withdraw the stock options in case the share value of the company falls below a predetermined level. This will reduce the risk of overhanging. This means that the company will be able to maintain a good face with the investors. Investors will not consider their investments as being at risk.
Jeremy Goldstein says that the knockout option has a way of keeping the employees on their toes. They must always make sure that the company remains healthy and solvent. With the knockout options, employees may lose their compensation if the share value falls beyond a certain level. This is what will cushion the existing shareholders from suffering any major setbacks.
Jeremy Goldstein is an associate from the state of New York and has been a corporate consultant for a very long time. Jeremy Goldstein has also founded his own law firm.
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