Jeremy Goldstein, the founder of his own business law firm, says that the best companies in the world maximize their valuation while compensating their employees in the best way possible. Compensation comes in many forms, Jeremy Goldstein advises. Compensation can come in the form of income, benefits and stock options. Learn more about Jeremy Goldstein: http://www.chambersandpartners.com/USA/person/485609/jeremy-goldstein
Stock options can be used as a tool for good when trying to attract investors. When an employee takes a stock option as a form of compensation, their annual salary tends to stay lower. On paper, this can give a boost to a company’s valuation as employee salaries look manageable to investors.
But Jeremy Goldstein warns that stock options as a form of compensation can backfire when trying to attract investors or keep shareholders happy. There is always the risk of hangover.
Hangover happens when employees cash out there stock options frantically when a company’s value drops below a certain point. The company then does not have the money to pay out the employee creating what is known as hangover.
But the New York business lawyer also advises that there are positives to stock options as compensation. When an employee becomes invested in the company with stock options, that employee tends to work harder in order to ensure a larger payout as the company’s value rises.
Mr. Goldstein recommends knockout options to keep the positives of the stock options as compensation intact while eliminating the risk of hangover. Knockout options remove an employee from their stock options when a company’s value drops below a certain point for more than a week.
Jeremy Goldstein is a 15-year business lawyer who has been a part of some of the largest business acquisitions in history. He also chairs the Mergers & Acquisition Subcommittee of the Executive Compensation Committee of the American Bar Association Business Section.