The employee incentivizing process with respect to EPS is one of the much-discussed topics in the economic environment of the companies. According to Jeremy Goldstein, an expert in corporate pay structure, EPS with respect to employee incentives are generally considered as a positive thing. While coming to shareholders, EPS becomes one of the critical factors that is deciding the share value and giving an opportunity for companies to offer better pay to their employees. Many recent studies showed that EPS being part of the overall pay structure produced excellent results for the companies. Therefore, Jeremy Goldstein thinks that EPS is an advantageous option to make it part of company’s business strategies.
However, Goldstein cautions that the competitive nature of share trading may give unnecessary benefits to companies using EPS. Some critics of EPS argue that EPS usage may create favoritism in companies. It can also lead to give significant control to the executives, scrapping collective control, and that may lead to skewed results. Those developments can lead to misleading of results, and it may significantly affect the interests of shareholders. Additionally, it can also lead to noncompliance issues with the regulators in worst cases.
Other critics confirm that these types of schemes are only producing short-term profits and no long-term value addition to the company at the end. Due to the contradictory thoughts on EPS metrics, Jeremy Goldstein advises a compromise to both the thoughts. He thinks that instead of paying per performance, EPS should be structured to make CEOs and Executives of different companies liable for their actions. Also, the pay per performance should be calculated based on the achievements of the long-term targets or goals of the companies. It should create an environment for sustainable, long-term growth of the firms and measurable and recurring share growth.
Jeremy Goldstein is an expert in corporate compensation programs for executives, CEOs, management teams, and more. He is the founder of a boutique law firm named Jeremy L. Goldstein & Associates. Goldstein also served on the compensation committees of various companies and collaborated with Verizon, Bank of America, Goldman Sachs, and more.
Jeremy Goldstein has nearly two decades of expertise in the industry and began his career with Shearman & Sterling LLP as an Associate. Later, he became a partner in another boutique law firm named Wachtell, Lipton, Rosen & Katz, where he was fully involved in the executive compensation practice.
Connect with Jeremy Goldstein on LinkedIn to learn more.