In the past years, companies have opted out of using stock options as an employee compensation docket. While some of these companies fear the disadvantages attached to issuing stock options, it is evident that there are in fact, other companies that prefer issuing stock options. However, according to one famous practicing lawyer Jeremy Goldstein, it does not always have to be that complicated as there are other options. But first, let us look at the advantages and disadvantages of issuing stock options.
Supposing the value of the stock options declines, there will be issues as employees will not be able to sell their stock options. Therefore, this will be regarded as loss. Moreover, the report on losses must be presented to various stake holders. These stake holders will in turn, suffer the consequences of devalued stock options. Evidently, this is not a pleasing scenario and no corporation wants to experience this ordeal.
Another disadvantage of issuing stock options is the accountants having to keep track of the numbers. This is in light of how busy trading in such derivatives can be. Typically, accountants dislike this fact and this discourages companies from using stock options.
The third and last disadvantage is the fact that employees dislike stock options especially if it is meant to reward their input in the company. Consequently, today’s workers are relatively smart and understand the fact that the economy dictates the value of stock options. In such instances, in case the economy crashes, employees will register tremendous loss.
From the disadvantages, it is easy to decipher the advantages and the value of using stock options.
For starters, stock options have improved benefits especially if employees receive them instead of extra wages. An additional reason is the fact that executive employees already know how stock options work. Therefore, they know the benefits.
Also, with stock options, earnings increase. This solely happens when the value of the business escalates as well. Relatively, employees begin to embrace their jobs by demonstrating high levels of concentration.
In the words of Jeremy Goldstein however, stock options can be replaced with knockout options because knockout options accrue less taxes. At the same time, they have increased benefits compared to stock options.
Jeremy Goldstein is a qualified legal expert who owns an independent law firm in New York. He uses this law firm to offer legal advice to corporations and businesses. Goldstein has vast experience in business management having worked in Bank of America Corporation and Goldman Sachs. Learn more: https://www.quora.com/profile/Jeremy-Goldstein-20