Many companies have been using Earnings Per Share (EPS) as an incentive program for their employees and shareholders. EPS, a performance-based incentive program, refers to a part of profits that a company pays out for each outstanding share of common stock. Jeremy Goldstein, an Attorney at law in New York City and Partner at Jeremy L. Goldstein & Associates LLC, explains how to successfully apply EPS and other performance-based incentive programs to ensure that both investors and employees are satisfied with the returns.
Earnings per share can be used to determine the profitability of a company. It is also what determines the price of shares of a company, therefore, motivating shareholders to either buy or sell. Since the payouts depends on the comprehensive performance of the employees, EPS drives employees to work hard at improving their productivity thus resulting in the overall success within the company. The program is, consequently, an advantage for businesses in many ways.
Critics of EPS are, however, not satisfied with its positive side as they claim that it only encourages CEOs to take advantage of the power it gives them, making them overlook employees’ merits and only reward their favorites. Other critics argue that EPS is not sustainable in the long run, as companies only pursue it for short-term profits. The unreliability and the frequent fluctuation of stock prices also add to critics’ list of complaints. Jeremy Goldstein, therefore, advice to both critics and those who are in support of the program to come to an agreement in which, instead of scraping away performance-based incentive programs, a system should be established to ensure that CEOs and heads of companies are held accountable for their actions. Companies should also ensure that their EPS guidelines get directed towards long-term profitability and growth of the business.
Jeremy Goldstein worked at a law firm in New York before deciding to start his private business, Jeremy L. Goldstein & Associates LLC, in 2014. The company focuses on providing advice on cosporate matters for CEOs, compensation committees and management teams. He is a Juris Doctor degree holder from NYU, has an M.A from the University of Chicago, and a B.A from Cornell University.
Jeremy Goldstein has been involved in many transactions for some of the most prominent corporations, including The Dow Chemical Company, Goldman Sachs, Verizon, and NYSE, just to name a few. Goldstein is also a blogger and frequently writes on matters concerning executive compensation and corporate governance.
Visit http://officialjeremygoldstein.com/ to learn more.