Jeremy Goldstein explains how knockout options help employers-article recap
Firms have come up with ways in which they save money. One of the options that have been in use in the recent years includes not providing employees with a stock option. There are problems that lead to organizations choosing this option.
One of the problems is that the value of the stock may drop and may limit the options that are available to employees. Another problem is that employees in the recent years do not prefer stock option as a way of compensation. This is because they think that economic situations may lead to the stock becoming worthless. Also, having the stock option as a way of giving benefits may lead to accounting burdens. This option has costs that may exceed the benefits from giving this option.
However, there are advantages of giving a stock option as a method of compensation. It can be used and is preferable to giving higher salaries and better insurance coverage. A stock option is easily understood by employees. Another advantage is that employees will tend to prioritize the success of the company. This is because when the stock price rises, the employees stand to gain.
A company can adopt the right strategy and gain the benefits above. A company can use the Knockout Strategy. This strategy is such that it has the best benefits as the stock option; however, employees stand to lose them if the stock price goes below a certain amount. The knockout strategy does not eliminate problems associated with the stock option compensation, but the obstacles that are associated with stock option are minimized.
About Jeremy Goldstein
Acting as the chair of Mergers and Acquisitions at the American Bar Association, Jeremy L. Goldstein is also a partner at Jeremy L. Goldstein & Associates LLC. The company main business is advising companies on compensation, CEOs, and management teams. It advises companies on matters to do with governance and sensitive situations and events in the corporations. He is also a speaker on corporate governance and executive compensation.
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