Employee benefits associated with stock options have in the recent past lost favor in the eyes of employers. The argument has been that stock options are not economically tenable for employers. Jeremy Goldstein, an authority in employment law, has been following these developments keenly and has summarized the reasons as to why employees are avoiding stock options.
Disadvantages of Stock Options
There are three disadvantages of stock options as explained by Jeremy Goldstein. First, Goldstein argues that stock options can overhang at times and consequently curtail the options available for employees. This is in most cases characterized by a decrease in stock value, which results in the skyrocketing of associated expenses. Secondly, Goldstein likens stock options with casino or lottery regarding uncertainty. In his assessment, the benefits that are associated with stock are not predictable in the sense that economic decline usually has a strong negative effect on stock worth. Lastly, Goldstein believes that the accounting burdens that come with the generation of stock-based benefits are draining to business. In his opinion, there are more financial advantages in not having those benefits than in having them. According to him, it is better for employees to cut-off stock benefits and instead increases employees’ salaries.
Advantages of Stock Option
A company would get a handful of benefits by embracing stock options according to Jeremy Goldstein. To begin with, Jeremy argues that since this type of benefits is easy for employees to comprehend, it is a good substitute for insurance coverage. Secondly, Jeremy is of the opinion that since the stock value is dependent on the success of a company, employees placed under stock benefits will work extra harder to ensure that the company excels. By so doing, customer service is improved, and new clients come along. The taxes associated with shares, on the other hand, are at times too high as compared to stock options. Any company seeking to reduce tax burden could find it more desirable to have stock options for its employees rather than stocks.
According to Goldstein, the only solution to stock overhand is to have a barrier option that he refers as Knockout. This type of knockout bars stock options from going too low by making them lose their options once shares depreciate below specified levels. By so doing, the risks of losing out on an employee’s benefits are minimized.
Jeremy Goldstein is a lawyer of a high professional and legal standing. His law firm, Jeremy L. Goldstein & Associates LLC, is based in New York and has been contacted to give business litigation for many reputable organizations such as Duke Energy and Chevron.
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