Stock options have been used in the corporate sector as a means of workers compensation for a long time. It is one of the oldest methods used even today. It has remained relevant because it allows workers be part of the company ownership. When workers are given an opportunity to own part of the firm they will work hard so that it does not fail. The whole idea behind the stock options is to make the worker feel appreciated and in return work harder to get the company the desired results. Stock options have however been losing their place in the industry recently because of some disadvantages that it has come to be associated with.
Stock options are associated with effects such as causing option overhang. This is a situation that happens when the stock options have lost their value and have moved to levels below which employees can execute them. The burden of managing the stock options moves to the side of the employer. There are many deductions which happen, and in this case, it is highly possible for companies to affect the shareholding capacity in the firm. Stock options also cause a lot of accounting challenges to the company. There are many transactions which have to be recorded.
EPS or Earnings per Share is another method used to offer incentives in business environments. This compensation method is based on performance. It determines whether the stock value of a company will be up or down. However, since it is based on performance, the metric for performance is manually set by the CEOs. They are the ones who determine who get what.
The main reason for this method, however, is not to reward employees but to attract investors into the business. The value of the stock is directly proportional to the earning per share. When the stock value is good, investors will buy shares. It is critical for business managers to get this critical aspect of this compensation method.
Rogue CEOs, however, use this opportunity to fake the stock value of a company since they can manipulate the metrics of gauging the performance.
About Jeremy Goldstein
Jeremy Goldstein, a compensation attorney with a law firm in New York, is one of the people who recommend the knockout options as a solution to the stock options. Jeremy Goldstein has worked with many firms in the United States in a bid to help them achieve proper worker compensation programs. At the same time, Jeremy Goldstein has assisted companies to deal with mergers and acquisition. He has worked with corporate executives on ways through which they can improve the operations of their firms by applying shrewd governance decision. Jeremy Goldstein has worked with some of the big corporations in the United States such as UTC and Verizon. Learn more: http://officialjeremygoldstein.com/