Should Earnings Per Share (EPS) be the main factor in deciding executive and other employee compensation? That’s the subject of an article about New York City business attorney Jeremy Goldstein recently published in the New York City Inquirer.
Using EPS as a metric for determining fair employment compensation is generally a good idea, according to Jeremy Goldstein. It obviously expresses the main goal of appropriate employee compensation, which is to enhance the strength and profitability of the business. EPS reflects the success the employees have had in running the company and keeping it profitable.
And EPS is extremely important to the shareholders. It is a prime factor in determining the market price for the stock. It influences the decisions of the company’s owners about whether to continue to hold on to their shares or to sell them, which also affects the share price. Also, recent studies have concluded that based employee compensation on EPS has made companies more successful.
However, opponents of using EPS also have some worthwhile arguments. They say the practice encourages CEOs to take actions that skew EPS in their favor, but which are not in the long-term best interests of the company. And, in the end, shareholders are best served when a company’s executives do what is best for the future of the company. Using EPS leads to favoritism and a lack of CEO accountability. The executives may skew EPS to drive the sales of its shares.
In his years of practice, Goldstein has seen how difficult it can be to fairly resolve these issues. Therefore, he favors a compromise that retains EPS while still holding executives accountable for their actions.
Jeremy Goldstein graduated from Cornell University with a B.A. in Art History in 1995. He went on to get his Master of Arts from the University of Chicago. He graduated from New York University School of Law in 1999. He started out as an associate with Shearman & Stirling, then moved on to the firm of Wachtell, Lipton, Rosen & Katz where he became partner. In 2014 Jeremy Goldstein formed his own firm, Jeremy L. Goldstein & Associates LLC, which focuses on advising companies on executive compensation, and other corporate governance issues, including those related to mergers and acquisitions.
Jeremy Goldstein has worked on many of the largest corporate transactions of this century. He has worked with Bank of America, Verizon, Goldman Sachs and oil companies. He writes for numerous law journals.
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