Knockout Options may be a term you have never heard of. Jeremy Goldstein helped break it down and explain what the meaning behind it is, and why it may be beneficial to companies and their employers. Many companies have for a long time offered stock options to their employees as a benefit, but both have noticed problems with this option.
To avoid these problems, but still be able to use such a benefit a company can go the route of a knockout option. In a knockout option, employees still get stock holdings with limits the same as or similar to a regular stock option. The knockout option though puts a stipulation on the stock that if the holding price plummets and reaches a certain low, the employee completely loses the stock.
This offers an incentive for employees to do what they can to ensure stock prices stay at certain amounts. The employee can also cancel the benefit when a stock gets very low and becomes close to the bottomed out number. Goldstein explains that knockout options aren’t the perfect solution, but can be more beneficial to both the company and their employees.
Jeremy Goldstein is a founder of his own firm, Jeremy L. Goldstein & Associates LLC, a firm that specializes in advising CEO’s, compensation committees, management teams, and corporations. Prior to founding his firm Goldstein was a partner at Wachtell, Lipton, Rosen & Katz. He serves as the chair of the Mergers and Acquisition Subcommittee of the Executive Compensation Committee of the American Bar Association business section.
Jeremy Goldstein earned his law degree from New York University School of Law. He received his Masters at the University of Chicago and his bachelor’s degree at Cornell University, with Cum Laude honors. Learn more: https://blogjeremygoldstein.tumblr.com/