As of late, there is a great debate over the performance-based pay programs between the long-term and short-term financial investment supporters. As the battle rages on between them, Goldstein decided to shed some light on the use of programs like Earnings per share (EPS) in incentive compensation program.
Earnings per share or EPS is largely considered as the vital factor in deciding the demand of a particular company’s shares in the market. Since EPS is a common metric irrespective of the companies’ magnitude of business, investors pay a great deal of attention to it while buying or selling of shares in the market. Those companies which include EPS in their larger pay structure found themselves among the best performers in the corporate sector. However, Jeremy Goldstein believes that EPS result being concentrated in the hands of management, they can manipulate it to the advantage of the company, who mostly concentrates on meeting short-term financial goals. Thereby, hurting both the pay structure of employees and the investors who fall into the trap of higher EPS.
EPS stands in the way of the sustainable flow of capital since it profoundly concentrates on meeting the short-term goals only. Goldstein says that investment groups like CtW Investment group are skeptic of EPS as they feel that its results can be skewed by management in order to raise more money from the public. In addition to that, they also believe that the Fed’s zero interest rate policy acts as a stimulus towards such behavior. Therefore they want the corporate leaders to revisit the use of EPS as a credible yardstick.
In such an environment where there is a persistent bone of contention between EPS supporters and opposers. Jeremy Goldstein advises that the performance-based pay programs like EPS must be closely monitored and the people who manipulate it should be held accountable. The goal of such programs should be in direction with long-term interests of the company and for the larger interest of the people, who hold major stakes in such matters.
About Jeremy Goldstein
Jeremy L. Goldstein is an experienced lawyer based in New York City. Having worked for a number of big names like United Technologies, The Dow Chemical Company, Verizon Wireless, Bank of America Corporation, SBC Communications Inc. and many more, he created a name for himself in the legal arena. He is specialized in legal subject matters like corporate governance matters, executive compensation and offers his valuable advice to CEOs and Management teams.
Jeremy had done his Masters in Art history at the University of Chicago and holds Juris Doctor, Law from the New York University School of Law. Initially, he worked at a reputed law firm named Wachtell, Lipton, Rosen & Katz. Later along with some associates he founded Jeremy L. Goldstein & Associates LLC, where is currently working. He holds a vast amount of wisdom on corporate governance and executive compensation issues and writes, speaks on the same extensively. He secured a place in The Legal 500, Chambers USA Guide to America’s Leading Lawyers for Business as a prominent executive compensation lawyer. He is actively working in Fountain House charity to combat the problem of mental illness among men and women. Learn more: https://www.facebook.com/pages/Jeremy-L-Goldstein-Associates-LLC/411406302333227