Share options are a great way for a company to provide additional pay to their employees without raising their salary. Unfortunately, less and less companies each year are offering stock options to their employees. Some corporations are doing this to save money; other reasons for such decisions are much more complicated.
Jeremy Goldstein, a business lawyer and owner of his own law firm in New York, recently addressed the pros and cons of offering your employees stock options.
One of the more complex reasons that companies cease the offering of stock options is to avoid their stock dropping in price. If the price of a stock drops then it is not beneficial to the employee at all.
Employees realize that their compensation is worthless. Tying into the previous point, if the price drops then employees might see stock options as worse than not being paid at all.
Goldstein says that stock options can also increase the financial burden on the employees. The money required to manage stocks is sometimes more expensive than the value of the stocks. If you don’t control a large amount of stocks, you may lose money by hiring someone to manage your finances.
Despite all of these pitfalls, stock options can still be a very profitable option for employees: they are easy to understand, black and white, negative and positive numbers. If the company is doing good, you have made more money; if the company is going through a slow spell, you may not see as much growth. This is great from corporations as well. When an employee is involved in the company at this personal level, it encourages them to do what is in the best interest of the company.
About Jeremy Goldstein
Jeremy Goldstein is a partner at Jeremy L. Goldstein & Associates. Jeremy Goldstein has worked on some of the biggest mergers and acquisitions in recent years. He was there when United Technologies purchased Goodrich and he assisted in the Verizon Wireless and ALLTEL deal.
Jeremy Goldstein is involved with the Executive Compensation Committee of the American Bar Association Business Section; he serves primarily as the chair of the Mergers & Acquisitions Subcommittee. Learn more: http://www.bizjournals.com/newyork/potmsearch/detail/submission/6423046