Stock options are one of the widespread methods used for workers compensation. It is a way through which owners of businesses can make employees feel like they are part of the company. Stock options, however, have been associated with multiple problems amongst them unpredictability of their value and options overhang. These challenges make it hard for businesses every time the stock value falls.
There are advantages and disadvantages of stock options, but definitely, the disadvantages outweigh the advantages. The reason that they have been used as a means of compensation is that they have a few advantages that make them attractive. For our purpose, the main reason stock options have been considered a good option is because they push the workers to work hard and help the business organization gain. The value of the stock options is tied to the performance of the business. For workers to receive their benefits, they must make sure that the company makes good profits.
Despite the factors we have outlined, stock options are still losing as a method of compensation. Consequently, there must be an alternative that must be implemented. An alternative needs to take have the benefits of the stock options while at the same time eliminating the problems associated with stock options.
Jeremy Goldstein, one of the accomplished lawyers in the United States is offering business an alternative that they can apply in place of stock options. He refers to the alternative as “Knockout Barrier Options.” This is a stock option that will eliminate the possibility of having a stock overhang.
There are other incentives methods which are applied in the business environments. According to Jeremy Goldstein EPS is one of the incentives methods that is widely used as a performance-based method. The method is attributed to business growth if properly utilized.
On the other side, some people see this method as ineffective. First of all, it is said to create favoritism in businesses. The people who set the metrics of performance can apply undue interfere with the credibility of the method. It is the work of the CEOs and other executives to come up with the metrics to determine the reward employees will get from a payment system.
Jeremy Goldstein in his years of studying various incentives methods recommends companies to use customized methods that fit their specific goals as a company. No company should apply a method just randomly without verifying whether it will serve the goals of the company.
About Jeremy Goldstein
Jeremy Goldstein is a compensation lawyer. He advises corporate executives on compensation methods that should work for their workers effectively. He has been in the industry for more than 15 years. He has worked with the big corporations and his advice has been tried and proved. Learn more: http://clsbluesky.law.columbia.edu/author/jeremy-l-goldstein/