Finding ways to compensate key employees in an organization is extremely important. One form of compensation that many organizations provide to top employees today are stock options. The stock options provide a good amount of alignment to employees and employers as employees will only benefit if the stock reaches a certain level. while there are benefits to providing stock options to employees, they also provide a certain amount of accounting challenges and other issues for organizations.
One way that an organization can help hedge against some of the downsides of stock options is to have a knockout clause in the stock option agreement. A knockout clause in a stock option contract will basically mean that a stock option will go away when the stock of a company falls below a certain level. It is almost the complete opposite of a stock option in that an employee will lose the option if the stock falls low enough. Learn more: https://www.slideshare.net/JeremyGoldstein14/22nd-annual-naspp-presentation-2014
One of the problems that organizations have with stock options is that they can cause a significant amount of accounting issues. These issues can be even more exacerbated if the price of the underlying stock continues to drop. By having the knockout option in place, this risk can go away completely. Organizations also have the ability to be flexible with the knockout rules in their agreement. While stock prices can fluctuate quite a bit and experience short-term drops, the agreements can stipulate that the stock price has to stay low for a extended amount of time.
If you are looking for more information about stock options and the knockout clause, one great person to speak to would be Jeremy Goldstein. This individual is an experienced compensation attorney that can provide you with a wide variety of different benefits. Jeremy Goldstein will be able to explain to you the different types of stock options that you can provide two employees, the benefits and drawbacks of each of these options, and how a knockout clause can help to hedge against some of the risks that go along with stock options.
Jeremy Goldstein has more than 15 years of experience as a compensation lawyer. Today, he manages his own prestigious law firm and has a great Client List that includes some significant Fortune 500 companies in a variety of different Industries. He is also involved in the law professional associations and a variety of different nonprofits and charities.