Many companies have recently chosen to pull the plug on stock options for employees sighting saving money as their prime reason. However, the details behind their move are more complicated than that. Of these, three reasons majorly influence the corporations to make this decision:
- Stock values are never constant for a very long time. They fluctuate often and so when they go downhill, it negatively imparts the options the employees have.
- Employees know what is at stake with these stock options during an economic downward trend and therefore show resentment toward them. Employees show more preference to increased earnings instead
- Considering the accounting process involved in issuing stock options to employees, the expenditure may very well overshadow the expected benefits.
Advantages of Stock Options
Despite the shift from stock options, there are some advantages tied to them;
- The simplicity of dealing with and understanding stock options make it a valuable option to be considered
- Since the value of stocks is dependent on the firm’s shares, it makes it necessary that employees give their best to see to the success of the corporation and thus in turn their individual success.
The Knockout Barrier
There is a solution for firms that still want to stick with offering options to their workers; the knockout barrier. The difference with this kind of stocks is that they have a specific share value below which the workers lose their options.
Another advantage with the knockout barrier is that one can withdraw in the case share values refuse to rise for a while. Additionally, accounting expenses associated with a pulsating stock in this case are probably much lower.
Jeremy Goldstein; The Man Behind JLL
His LinkedIn account shows that Jeremy Goldstein is an associate and founder at Jeremy L. Goldstein and Associates. He is the go to guy for corporations looking for advice on their compensation programs.
A session with the experienced advocate Jeremy Goldstein guarantees a wealth of expertise and great financial tricks to make it through the wave of shareholder unrest.
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