Jeremy Goldstein, the founder, and partner at Jeremy L Goldstein and associates a law firm which advises companies on compensation and corporate governance especially on sensitive issues. Jeremy began the law firm in 2014 after his stint at Wachtell,Lipton.Rosen and Katz where he was a partner. Before joining Wachtell, he was an associate at Shearman and Sterling LLP.Jeremy holds a Bachelor of Arts degree from Cornell University and Masters in Art from the University of Chicago. He also studied law at New York University School of Law.
Jeremy has participated in significant company transactions with major companies, and in a recent article, he explains how options help employers. He says companies have currently curtailed options as an employee benefit. Jeremy says this is due to the fact if the stock prices for the company fall it will be impossible to exercise the options and employees are well aware of this. Jeremy also notes that staff members have options as a valuable option in comparison to the money they would have received.
In spite of the above disadvantages, Jeremy notes that options have an advantage in that its easy for the staff members to understand and they boost the earning of the employees if the share price of the company goes up. Jeremy advises that if a firm wishes to give the employees options,the firm can overcome the disadvantage by embracing what he calls the knock out strategy. This strategy works as the standard option, but the employees lose the option if the share value falls below a specific amount.
The knock out strategy also reduces the accounting cost especially if the firms stock is volatile. The knock out options also mitigate threats for non employee investors on shrinking shares they are likely to receive once the options are exercised.The knock out strategy prevents the share price of the stock from falling below the forfeiture price. Employees know when they can earn more. Jeremy cautions that before a company takes up the knock out the strategy they should involve the company auditors and take some time after derivatives have expired before they can issue new ones.
Follow Jeremy Goldstein on Facebook.