In recent years, companies have decided to no longer give their employees stock options. Some decided not to, to save money. Others have decided not to, for more complex reasons. There are three main concerns that have convinced companies to drop these benefits.
- When the value drops, employees don’t have the opportunity to exercise their stock options. The company is still forced to report all related expenses. This opens up stakeholders to the possible risk of option overhang.
- Most top-executive employees don’t have faith in this type of compensation. Employees understand how the stock value is based on stock market and economy. When there is a sudden economic fall, they know their options will become worthless. In this form, the benefits are more like free play at casinos instead of free cash.
- Options because a massive burden on the accountants. The resulting costs could negate any financial gains. Most employees also believe they would benefit more if given a higher salary instead of these options. Employers could afford to give raises, if they eliminated options.
Stock options are often better than equity or increased wages, because they are simpler to understand and each employee receives the same compensation. Stock options encourage employees to prioritize company’s success. Employees realize that their personal wealth only increases if the company’s share value increases. This causes them to look for new ways to create more business and keep current business growing.
The IRS has made it difficult for corporate executives to offer employee equities. If the company decided to give shares instead of options, they could face a bigger tax burden.
All you need to know about Jeremy Goldstein
Jeremy Goldstein has become one of New York’s premiere business lawyers. He has more than 15 years of experience in this industry. Jeremy Goldstein currently runs his own firm, Jeremy L. Goldstein and Associates LLC.
Jeremy Goldstein has been influential in many major corporate deals that have involved many of the country’s leading companies such as AT&T, Merck, Verizon and United Technologies. Jeremy Goldstein serves on the board of several groups including the nonprofit Fountain House. Jeremy Goldstein earned his law degree from the University of New York School of Law. Jeremy Goldstein continues to help people learn more about the companies they are working for. Jeremy Goldstein continues to help big and small businesses make the right decisions. Learn more: http://clsbluesky.law.columbia.edu/2015/09/10/goldstein-and-associates-discuss-short-termism-performance-goals-and-executive-compensation/