Compensating employees with stocks is not always the best way to go, especially with so much regulator scrutiny placed on most all transactions of an appreciable size. Jeremy Goldstein, an attorney with his own firm who advises on all kinds of employee compensation packages, has an alternative to stock options for senior level executives. The solution he has is called a “knockout option.” There are a number of reasons why stock options are not good, including stock value drops, which serve to negate the selling option often times, and for employers, they represent an accounting challenge. The costs of managing these options are greater than the benefits of the programs at times.
Knockout options have most of the same features as stock options, including time limits and tenure-of-service clauses, but they differ in what happens if the stock value falls under a certain amount. Employees will lose knockout options if a preset value is breached. These types of options give employees the right to purchase stock at a particular price, and invariably a 50% drop from the knockout option price will mark the expiration value. This is not automatic, however, and most of the time these deals are structured so that the price has to remain below the expiration value for a period of time, perhaps a week.
Prior to starting his own firm specializing in helping companies manage employee compensation packages, Jeremy Goldstein worked on a number of large-scale acquisitions as a partner at a large New York law firm. During that time he worked on several M&A deals, including Goldman Sachs and Kinder Morgan, and the Verizon Wireless/Alltell deal. He also served on the American Bar Association’s Executive Compensation Committee.
A stalwart in his field, Mr. Goldstein was nominated top legal talent in executive compensation by the publication “Legal 500.” Having graduated from the University of Chicago, with honors, and going on to New York University School of Law, where he received his J.D., Jeffrey Goldstein is creating a legacy of great work in employee compensation plans that work for employees and employers alike. Learn more: https://profiles.superlawyers.com/new-york-metro/new-york/lawfirm/jeremy-l-goldstein-and-associates-llc/a958e5a0-ace7-44fa-8f53-da9d83c3b29b.html