In recent years, many corporations have steadily begun reducing the opportunity to garner stock options for their employees. There are often many complex reasons that companies choose to do so, and firmly at the helm is for the reduction of expenses. Many companies choose to eliminate these options for several reasons. If the stock price of a company drops significantly, stockholders may be susceptible to option overhang, and employees won’t be able to exercise their options. Downturns within the economy often diminish the value of stocks, in some cases making the worth next to nothing. Providing stock options also accompany accounting issues for the company and employees often prefer higher salaries to stock options. While there are also a number of advantages to providing stock options to employees, an option that a company seeks is to provide employees with a knockout stock option. With a knockout stock option, the value of the option drops to nothing if the stock price drops below a certain predetermined amount. Due to this fact, employees are often times increasingly motivated to seek the best opportunities for the company, in being that they are mutually beneficial. Accounting costs for a corporation that is relatively volatile are also greatly diminished by utilizing knockout options because of the decreased amount of time that the option remains valid. Stockholders that are not employed by the company are also not affected by option overhang.
Jeremy Goldstein is the founder and a partner at Jeremy L. Goldstein and Associates, LLC, which is a boutique law firm that focuses on providing corporations, executives, and compensation committees with sound information regarding executive compensation and corporate governance. He attended school at Cornell University where he received a B.A. cum laude and with distinction in all subjects. He also has an M.S. from the University of Chicago, as well as a J.D. from New York University School of Law. Prior to the founding of Jeremy L. Goldstein and Associates, LLC, Mr. Goldstein was a partner at Wachtell, Lipton, Rosen, and Katz.
With a very successful history in the area of law, Jeremy Goldstein has been actively involved in many of the most important corporate transactions of the last 10 years, including United Technologies acquisition of Goodrich, as well as with Duke Energy and Progress Energy. Today, Jeremy Goldstein is actively involved with the American Bar Association Business Section, acting as the chairman of the Mergers and Acquisition Subcommittee of the Executive Compensation Committee.
To learn more, visit http://officialjeremygoldstein.com/.