Jeremy Goldstein Offers Advice On Knockout Stock Options

With more than 15 years of experience working as a business lawyer, and having established his own New York law firm, Jeremy Goldstein is uniquely positioned to offer advisory services relating to employee benefits and business law. Whether it’s stock options or insurance, he has the experience and the knowledge to tackle any issue.


Over the years, he has played a major role in a number of large-scale business transactions. With clients including industry giants such as Chevron, Duke Energy, Merck, Bank One, AT&T, and Verizon, Goldstein offers a level of experience that’s hard to come by. He serves as a board member for both the nonprofit Fountain House as well as a highly-esteemed law journal.



Are Stock Options A Dying Breed?

A recent trend in corporations has vastly reduced the number offering stock options to their employees. The primary motivator behind this change could be considered cost, but, in reality, it’s not that cut and dry. There are quite a few possible causes for this trend, but there are also solutions available, which still allow companies to offer those options.



Why Stock Options Are A Good Thing

Stock options provide a number of advantages, but they also have at least one major disadvantage. If a corporation’s stock value suffers a significant drop, then employees simply become unable to exercise their options. However, the corporation is still forced to report any associated expenses, and the stockholders could face a high risk of option overhang.


But, despite the disadvantages, stock options are often considered a better choice than equities, improved insurance coverage, or even additional wages. But why? The answer is simple. Employees can understand stock options easily, and they provide all of a corporation’s employees with something of equal value. Moreover, stock options can provide an increase in the personal earnings of employees if the company is doing well, encouraging employees to innovate and to strive for quality.



How Can The Risks Be Balanced Out?

One of the best solutions for eliminating risks as well as rewarding employees comes in the form of knockout stock options. Knockout options are special in that they expire when a company’s share value drops below a certain point. Knockout options also retain the same vesting requirements and time limits as conventional options, making them an ideal choice.


However, knockout options aren’t a magic wand, they have their own set of problems. Luckily, those problems have simple solutions. The largest risk with knockout stocks is short-term plunging eliminating an employee’s benefits in the long-term. A common way to avoid this issue is by only canceling a knockout option when the share value remains under the threshold for a specified amount of time, usually one week.


Knockout options provide employees with powerful incentives to pursue excellence and to innovate, by attempting to prevent the stock value from dropping, and, if they succeed, then they earn more as the share price increases.


For more information, connect with Jeremy Goldstein on LinkedIn.