The popularity of stock options is increasingly losing interest by those who run companies. While many factors have played a role to their decline over the last 10 years, three concerns have been raised including: the expenses associated with the stock option often is more than the value perceived by the employees, When a company’s stock value falls drastically and the options have no chance at being-in-the-money, the company faces an expense and must deal with overhang, with no way of getting rid of them and finally stock options do not give employees any drive to work harder. Learn more about Jeremy Goldstein: https://www.slideshare.net/JeremyGoldstein14/ and https://www.slideshare.net/JeremyGoldstein14/22nd-annual-naspp-presentation-2014
Stock options recipients benefit from options. Employees only benefit if the stock price goes up and options strongly encourage employees to increase stock price, specifically those in high-growth industries. Stock options are easier to explain to employees.
Options are easier to deliver than the other forms of equity compensation. Companies must find a way to use stock options while decreasing the compensation expense that is part of their grant and to solve the problem of continuing expenses and overhang, especially when the option significantly falls.
To solve most of these problems, Jeremy Goldstein offers the idea of the “knockout” stock option. These options will be forfeited if the price tied to the option falls below a certain point. Jeremy Goldstein suggests that in order to avoid the automatic forfeiture, knockout options should only be forfeited if the price falls below a set threshold for a length of time such as 5 or 10 trading days.
Jeremy Goldstein is one of New York’s top corporate lawyers, amassing more than 15 years of experience as a business lawyer.
Goldstein established his own law firm in New York. He has been a part of many of the country’s largest corporate transactions of the last 30 years.