Stock options have both advantages and disadvantages. The disadvantages have far-reaching effects such that many businesses are keeping away from them. The disadvantages outweigh the advantages, and this is the reason they have proved to be a liability. Companies have been trying to make more money, but such compensation methods have been working against the possibilities of making more profits. There are other reasons apart from saving money which have been behind corporations rejecting the idea of stock options.
Disadvantages that are associated with the stock options can make a business not perform well. Take the case of stock options becoming an accounting burden to the company. They are part of the company records whether the business makes profits or losses. There is nothing the business can do to avoid them. It normally leads to the company incurring more losses as it has to budget for something that is already making losses for the company.
Stock options are also susceptible to losing value. One, the company will be affected, and there will be option overhang. Option overhang will make the shareholders lose their investment in the company. Secondly, employees will lose their ability to use the stock options. Once they lose value, they are useless and add no value to the business or the employees.
It is clear that there is nothing to earn from the stock options. They can do more harm than good to the business. Jeremy Goldstein, a lawyer in NY, recommends that businesses should replace them with knockout options. They are better and protect the business from adverse effects in case of a drop in the stock value.
Application of EPS in employees’ compensation
Earnings per share is another effective method that can be applied in the corporate sector as a means of workers compensation. EPS allow incentives to be given to workers depending on the performance. If properly implemented, this is a method that has can lead to the growth of a business.
EPS have another effect on the business in that they determine the stock value in a company. The stock value is a key determinant of shareholders’ decision on whether to buy or sell a particular share. According to Jeremy Goldstein, business executives should use this method as a way of creating growth in a company. When the incentive is based on workers performance, every worker will put maximum effort to earn better pay. It is upon the executives in the corporate sector to lay out a strategy that will lead to the growth of their businesses.
About Jeremy Goldstein
Jeremy Goldstein has a law firm in NY known as Jeremy L. Goldstein & Associates. Jeremey Goldstein has been a compensation lawyer for a long time. He has worked with big corporations such as the Bank of America, Goldman Sachs, and Verizon. Learn more: https://nycinquirer.com/2018/01/15/nyc-lawyer-jeremy-goldstein-recommends-compromise-for-employment-incentives/