Through the years, Jeremy Goldstein has established himself as an investment professional that both employees, employers, and regular investment aficionados know and trust. In his most recent piece, he discusses how stock options are becoming a dying benefit for many of the most valued employees of a company. However, some companies are arriving at an ingenious compromise. They are offering these valued employees what is called “knockout options”, and Jeremy Goldstein is happy to explain the concept further. Learn more: https://twitter.com/jeremy_gold1
First of all, Jeremy Goldstein explains why many companies curtail these benefits. Number one, these stock options benefits do not allow for the value of the company dropping significantly. Also, many employers are hesitant to offer this option to their employees simply because of the risk of economic downturns. Finally, many employers simply do not want the hassle in accounting these stock options would create. Of course, there are also advantages to offering employees some stock options. Just one of these would be the fact that often employees will be more motivated to work hard for the company if their personal fortune is on the line.
So, how do employers reconcile the advantages and disadvantages and mitigate any of the downfalls? One way they can do this is through knockout options. For example, employers can specify that if the stock value of an employee’s portfolio jobs to a certain lower value, they lose the stock. Of course, they have to allow for temporary losses. Thus, for many companies The knock-out option only occurs if the stock remains lower for an extended period of time.
About Jeremy Goldstein
Jeremy Goldstein has made his mark as the founder and managing partner of Jeremy Goldstein and Associates. Before that, he was proud to have graduated from the prestigious New York University School of Law.
Goldstein was also a partner at Wachtell, Lipton, Rosen & Katz for 14 years, and he also an associate at Shearman and Sterling for a year from 1999 to 2000. He has immense experience with law and investment procedures and he is always proud to share his knowledge and help others improve their portfolio.