Jeremy Goldstein Explains Stock Options and Knock-Out Clauses

Jeremy Goldstein serves as the chair for the Mergers & Acquisitions Subcommittee at the American Bar Association’s Business Section. He is also involved with the Professional Advisory Board at the NYU Journal of Law and Business.

He graduated from New York University School of Law and the University of Chicago. He also attended Cornell University.

Jeremy Goldstein currently is a partner at his own law firm, Jeremy L. Goldstein & Associates. Goldstein has over 15 years in experience as a business lawyer. He recently took the time to explain to employers the pros and cons of offering their employees stock options.

Pros

One of the biggest advantages of offering stock options to employees is an obvious one. If an employee has stocks in a company, it means they profit when the company does better. This gives them a personal interest in the company, meaning that they will work harder and be more effiecient. They are no longer just earning money on a per hour basis. They want to see the company grow.

Another one of the benefits is tax advantages. When a company increases an employees pay, they could face tougher tax penalties. Instead, if that company had just offered stocks as a raise, they would not have seen an increase in their taxes.

Knockout options can result in some pretty unorthodox savings. Executive compensation figures are typically lower each year, but it enables the annual earnings for the company to be more accurate. This looks good in the eyes of shareholders.

Cons

If a company’s stock drops, Goldstein says employees will be unhappy. Employees are getting coy to the inner-workings of stock options, and they understand that stock options are worthless in a company that shows no growth. Learn more: http://clsbluesky.law.columbia.edu/2015/09/10/goldstein-and-associates-discuss-short-termism-performance-goals-and-executive-compensation/

Stock options can sometimes make an employee lose money. If an employee doesn’t know how to manage his stocks alone, he must hire someone to do it for him. The cost of hiring such a person can sometimes result in losing money.