There are pros and cons to offering stock options to your employees. People understand them which is a benefit, and they entice people to work hard knowing if the company stock does well so do they. On the other hand, they can be difficult for accounting departments to deal with.
One expert in executive compensation, Jeremy Goldstein, says that if you’re going to award stock options it’s best to use the right strategy. There is one strategy he says that is called “knockout“. They work the same as normal stock options in that they have time limits and vesting requirements. However, if the share value falls before a specified amount for a reasonable period of time the employees lose their options.
For one example, if the option is for five years and the employee can buy the stock at $100 per unit, it’s common that if it drops below $50 the option to buy is lost. There is also a time for the stock to be below the set value, usually a week.
Jeremy Goldstein says that another benefit to using the “knockout” strategy is that the numbers used on annual disclosure forms for executive compensation are lower. The benefit of this is that the annual proxy ends up being more accurate which is something that shareholders greatly approve of.
Jeremy L. Goldstein & Associate, LLC is a law firm that he founded in June 2014. He specializes in executive compensation. Prior to opening his own law firm, he was a partner at another New York City one, Wachtell, Lipton, Rosen & Katz, for 14 years. He earned his law degree in 1999 by attending New York University School of Law.
Jeremy Goldstein’s services are often used by top executives and compensation committees. This is particularly true when a mergers & acquisitions transaction is being completed. One of the side effects of an M&A event is that executive compensation packages need to be analyzed & possibly retooled when such an event happens. Experts like Jeremy Goldstein can provide their advice so that sensitive situations like this are handled in the most appropriate and legal way.
Jeremy Goldstein has also written and spoken many times about executive compensation issues and other legal matters he has dealt with. The Legal 500 named him one of the leading lawyers on these issues in the United States, as did Chambers USA Guide to America’s Leading Lawyers for Business. Learn more: https://thereisnoconsensus.com/jeremy-goldstein-explains-knockout-options-help-employers/