Earnings per Share, simply known as EPS, is a highly discussed term of metric, and a majority of the compensation experts around the world are confused to include it in employee payments. There are contradictory stands by them, and even companies have varied opinions on it. This is where Jeremy Goldstein, an attorney with expert knowledge in executive compensation structuring, explained the importance of EPS, its possibilities and drawbacks, and finally provides the most recommended approach on choosing the metric. According to him, using EPS metric in performance-based pay programs is a good thing.
When it comes to shareholders of a business, EPS acts as one of the largest influencers of share price, and it helps them to decide to either buy or sell stocks. Inside the companies, it helps management to decide on employee payout based on it. A study conducted recently showed that EPS being part of the pay structure helped companies to be more successful. Though it looks like a beneficial system, Jeremy Goldstein says that it creates some unfair advantage to the executives considering the competitive nature of stocks as well as its trading. A section of experts says that it may create favoritism and cause blind eyes to CEOs.
They also say that the system gives better say to executives which is against the collective control concept and may even help the executives to skew results. This makes the shareholders misled and sometimes becomes illegal. A few others think that the metric only focuses on generating short-term profitability against the long-term goals of the company. This is where Jeremy Goldstein advises a negotiated stand on adopting EPS. He asks the companies to include EPS in the pay structure but make the executives responsible for their actions. Also, EPS should be restructured to ensure long-term results and goals of the company and should be ensuring sustainable growth to the company.
Jeremy Goldstein is a lawyer based in New York City, and he is part of many executive compensation committees of various companies. He collaborated with Bank of America, NYSE Group Inc., Verizon, Goldman Sachs, and more. Goldstein has also collaborated with some of the largest acquisitions in the corporate world in the recent decades.
He is the founder of a boutique law firm, practicing in the areas of corporate governance and executive compensation, called Jeremy L. Goldstein & Associates. Goldstein has nearly two decades of expertise in the areas of mergers and acquisitions, executive compensation, and more. Learn more: http://www.chambersandpartners.com/USA/person/485609/jeremy-goldstein