Various companies have decided to stop their employees from acquiring stocks over the past decade. The reasons that they are citing for this unceremonious move are many but saving money is one of them. The other reasons for this include the following:
The stock option of compensation often gives employees an added accounting burden. Moreover, the finances may dwindle rapidly and it will not be equal to the compensation that the employee required. Most employees prefer to be compensated in cash rather than stocks because it may result in a higher amount.
Most employees are cautious about this method. This is because they are afraid of the depreciating economic value of some stock. Therefore, they have become more vigilant when it’s being used as a means of compensation.
The value of the corresponding stock may drop rapidly. Therefore, the stock and the corresponding compensation may not tally. This will automatically result in the loss or of the company.
On the other hand, Jeremy Goldstein says that the stocks compensation still has some advantages. This includes the fact that workers are likely to work hard to ensure that their stock compensation remains relevant in the existing market. Therefore, the solution of ensuring that this method continues to work is to employ the knockout method, taking steps to minimize overhang and to eliminate the stocks for a week when the company isn’t doing well. In addition to this, the company must communicate with its auditors about all options they are offering their employees.
ABOUT JEREMY GOLDSTEIN
Jeremy Goldstein is a partner at Jeremy L. Goldstein & Associates, LLC. This is a boutique law firm which specializes in advising compensation committees, CEO’s and management teams in executive compensation.
Visit http://jlgassociates.com/ to learn more.
In 2003 Karl Heideck graduated from Pennsylvania’s Swarthmore College with an Bachelor of Arts in English language and literature degree. He also attended Philadelphia’s James E. Beasley School of Law at Temple University in 2009 where he received a law degree. He has been working in the Philadelphia area for more than 10 years. Currently, he works as an attorney at the prestigious law firm of Grant & Eisenhower PA.
Attorney Karl Heideck is a highly regarded litigator, consultant, and adviser who retains a daily blog designed to help his peers on litigation matters and he breaks-down legal news and its impact on the residents of Pennsylvania. His areas of expertise extensively covers legal matters including product liability cases, employment proceedings, commercial and banking litigations, and security fraud.
Karl Heideck aptly reviews transactions related to the mortgage crisis of 2008 where purportedly redlining by banks drew imaginary red lines around neighborhoods, mostly involving low income families. Redlining represented people whom banks did not want to extend loans to. One such news event that Attorney Heideck has highlighted is Philadelphia’s lawsuit against the Wells Fargo Bank.
With existing charges against Wells Fargo for creating fake customer accounts, Wells Fargo is also being accused of violating the Fair Housing Act of 1968 which involves using unfair lending practices geared toward minority mortgage borrowers. The 2010 U.S. Census sites Philadelphia as having a large minority population where 43% of its residents are African-American and 12% are Hispanic.
Wells Fargo is accused of maneuvering Philadelphia minority mortgage borrowers into riskier loans with higher interest rates that are far riskier than the lower risk and interest mortgages approved for the bank’s white borrowers. The City of Philadelphia’s complaint also alleges that this type of action by Wells Fargo forces minority families into foreclosure causing blight in many neighborhoods. The Philadelphia vs. Wells Fargo complaint has the city asking for monetary damages along with an injunction to stop the bank from using a lending discriminatory practices.
Learn more about Karl Heideck: http://www.phillypurge.com/2017/08/23/karl-heideck-examines-the-newest-car-seat-laws-in-pennsylvania/