Earnings per Share, simply called as EPS, is a parameter used by many companies in the performance of the executives and their compensation structuring. Though a significant number of companies are using the option, a majority of people are concerned or confused about the effectiveness of EPS as a metrics. The list includes a large number of experts who are on the compensation committees and advisory groups as well. This is where Jeremy Goldstein, an authority in executive compensation structuring, explains about EPS, different thoughts on it, and his views on including it in the performance parameters of the executives.
According to him, EPS should be treated as a positive thing. While coming to the shareholders, it becomes one of the best choices to influence the stock price as it helps them to trade their shares in the stock market. While coming to employee point of view, it gives companies to offer a better payout per employee considering the performance of EPS. A number of studies showcased that adding EPS into the pay structure helped companies to be more successful. Though it looked advantageous to every stakeholder of a company, Jeremy Goldstein says that its competitive nature including trading leaves the organizations to take undue advantage.
Many critics of EPS scheme think that it can create favoritism as well as a blind-following to the CEOs of companies. Compared to collective roles, such schemes provide greater power for executives, and that helps them to alter the results for their favor – which is creating blows to shareholders. Some others argue that such mechanisms are only targeting short-term profitability, and not creating anything valuable in the long term. Jeremy Goldstein advises people to take a compromised stand on EPS. He asks people to adopt EPS, but it should be making the executives responsible for their deeds. The pay per performance should be ensuring long-term goals of the company.
Jeremy Goldstein has more than 17 years of expertise in executive compensation structuring. He was part of the compensation committees of a number of companies such as BoA, Verizon, NYSE Group, Goldman Sachs, and more. Goldstein was also involved in a number of acquisition transactions of reputed corporations.
Jeremy Goldstein began his career with Shearman & Sterling LLP as a Law Associate after earning Law graduation from School of Law – New York University. Later, he collaborated with Wachtell, Lipton, Rosen & Katz as its partner before founding his own law firm, Jeremy L. Goldstein & Associates.
For more information, connect with Jeremy Goldstein on LinkedIn.