Earnings per Share has often been a topic of conversation in recent days. Some recent controversy surrounding the disadvantages of the pay-per-performance model has caused some companies to drop it completely. While the advantages of the model are clear, providing increased incentive for employees to work towards the benefit of the company, and providing a profound effect on stock prices, it’s not without disadvantages. However, Jeremy Goldstein believes that it doesn’t have to be dropped completely. He provides his insight on the EPS model, as well as a compromise that allows you the advantages of pay-per-performance without the drawbacks of EPS.
The Drawbacks of EPS and How to Fix Them
EPS is fantastic. It provides numerous advantages and its a proven tool for growing your business. But it doesn’t come without drawbacks. Higher-ups are easily able to take advantage of the system, sometimes using it to manipulate metrics to their benefit. This manipulation can cause lasting damage to a business and misleads shareholders in order to drive up share prices and make a quick buck. This is, in part, due to a core instability within EPS which makes it unreliable and prone to fluctuation.
But there is a solution that allows you to use EPS for long-term benefits, and it comes in the form of a compromise. As Jeremy Goldstein explains, if executives and CEOs are held responsible for using EPS to manipulate share prices, or damaging the business in other ways, it would encourage long-term planning, align the metrics with that goal, and allow the company to grow and prosper.
Jeremy Goldstein, J.D.
Goldstein is a New York business lawyer who has worked in the field for many years and is considered one of the best business lawyers in the United States. He currently runs his own law firm, which has served numerous major clients, from oil and cellular companies to major banks. He is highly regarded in the field of law and has earned positions in the Legal 500 as well as the Chambers USA Guide to America’s Leading Lawyers for Business.
In addition to his career in law, he makes sizable donations to Fountain House, which aims to provide help to those who suffer from mental illness. He also contributes to a number of law journals, including the NYU Journal of Law and Business. Overall, Goldstein is an exceptional lawyer, well qualified to be tackling the issues of pay-per-performance and EPS. Learn more: https://www.slideshare.net/JeremyGoldstein14/aci-compensation-committee-presentation-2016