Corporate compensation is extremely difficult for a company to get right. Several questions have to be asked, and research needs to be done to find the right way to incentivize employees that will increase the bottom line without diluting the company’s value for the shareholders. Finding this middle ground is where lawyers like James Goldstein come in.
In one particular dispute case that has gained a lot of traction in recent years, Goldstein had to make a determination on whether a company should use performance-based pay metrics like EPS and net income for the ultimate calculation of employee incentive payments. The argument has always been that employees are empowered and feel better about the place they work when they are incentivized based on performance. They feel like they are able to help determine exactly what their bonus will be.
This school of thought has been questioned in the recent light shed on several executive scandals and the fact that these bonuses only look backward. Executives have a lot of power to push off major contracts or accelerate revenue when it is getting close to bonus time. Also, many of these bonuses do not consider the long-term well-being and growth of the company, but only the short-term successes that the company has had. This is not a good way to grow companies, and many investors know that incentive payments based on performance may not actually increase the value of the shares they hold.
Jeremy Goldstein’s advice is to create a program that focuses not only on the short-term metrics like earnings-per-share but to also create a piece of the incentive that focuses on future results. He also suggested that companies should work to keep executives more accountable and keep them from changing major business decisions based solely on their bonuses.
Jeremy Goldstein has solved many disputes just like this one over the course of his career. He has been so successful at coming up with creative and innovative solutions for companies that many Fortune 500 executives have used him as a personal adviser and invited him to their compensation committees. He is even the Chair of the M&A Subcommittee of the Executive Compensation Committee for the American Bar Association.
Goldstein earned his Juris Doctorate from the New York University School of Business. He has worked in corporate governance and compensation law for years, forming his own firm, Jeremy L. Goldstein & Associates. He will continue to work with companies to make sure they have the best compensation plans to keep both the employees and the shareholders happy.