The climate of the corporate world has changed considerably over the last few decades, and today, many corporations around the world no longer choose to offer stock options as an incentive. There a multitude of reasons that companies have mostly discontinued this process, and despite the fact that money is at the root of this new approach, the real issues are significantly more complex. There are three major reasons that corporations have chosen not to offer stock options, including the expensive accounting costs that this process creates, risks associated with a falling stock price which could lead to option overhang, as well as the fact that, during an economic downturn, the options may become worthless.
As a solution to this problem, corporations may choose to consider including a knockout clause with their options. A knockout option carries all of the benefits of a tradition stock option, but if the price of the stock drops below a certain number, to be determined by the company, the employee will lose the stock option. Including a knockout option will help the company to decrease the costs associated with accounting. Another major advantage for a company to employ the knockout option is the fact the stockholders who are not employed by the company are not affected if the price drops considerably, reducing the volatility of utilizing this method. The companies true earnings are also more accurate, helping to satisfy stockholders.
The founder of Jeremy L. Goldstein and Associates, LLC, Jeremy Goldstein is also a partner with the company, having started it after a very successful stint with Wachtell, Lipton, Rosen, and Katz, where he was also a partner. Prior to founding his own firm, Jeremy Goldstein attended Cornell University, where he received a Bachelor of the Arts Degree. He continued his education by attending New York University School of Law where he received his J.D., and he also studied at the University of Chicago, where he received his Master’s Degree. Throughout his career, Jeremy Goldstein has played an instrumental role in many powerhouse corporate transactions including the acquiring of Goodrich by United Technologies Corporation, as well the deal between Miller Brewing Company and South African Breweries PLC. Today, Jeremy Goldstein is a very active speaker and writer on executive compensation and corporate governance. He was also named one of the top executive compensation lawyers in the country according to Chambers US Guide to America’s Leading Lawyers for Business.