Jeremy Goldstein has worked tirelessly for years to try to come up with the best solutions for everyone in a compensation dispute. Recently, Goldstein, a well-known lawyer in New York and the founder of the boutique law firm Jeremy L. Goldstein & Associates, has been posed the question of whether performance-based incentive plans are good for the company in the long-term, and he has offered his advice to just about every company out there. Learn more: http://officialjeremygoldstein.com/
Performance-based incentive plans are those plans in which employees are given a bonus that is dependent on the company reaching its goals. These goals are often things like net income, earnings per share (EPS), or any other metric of earnings. If the company reaches the goal, then the employees are compensated. However, now many analysts and owners are calling into question whether these plans are good for companies.
Many people think that executives have too much power to manipulate earnings, and thus their bonuses, under these plans. If a CEO wanted a larger bonus this year, he could just stop expenditures. While this would help net income in the current year, the company would have trouble running in the long-term if it never spends any money. Similarly, people are worried that employees will focus more on getting products out the door than on creating a quality product, which could possibly hurt production and sales down the road.
Jeremy Goldstein has determined that the solution to this problem is twofold. First, compensation committees need to be looking at their executives more closely. They must determine if the decisions made by CEOs, CFOs, COOs, and others were made just to increase the bottom line for that year or if they were made to help the company in the long-term. This will keep these individuals accountable and make sure that they don’t sacrifice the company’s long-term successes. Second, companies need to add some more metrics to their bonus calculation that focus on meeting forecasts several years out instead of just in the current year. By making this forward-looking, employees will be forced to take the longevity of the company into account when making decisions.
Jeremy Goldstein has worked in corporate law for years, and he has helped many companies make tough decisions just like this. He has shown his expertise time and time again, and he is even the Chair of the M&A Subcommittee of the Executive Comp Committee of the American Bar Association Business Section. Goldstein earned his JD from the New York University School of Law, and also attended the University of Chicago and Cornell for his masters and undergraduate degrees.