Jeremy Goldstein, a New York City-based lawyer, knows all too well the conflicts that can arise from accounting practices in regards to their influence on employee incentives. Perhaps the most used accounting term when it comes to determining how employees, and investors, are incentivized according to performance is the Earnings Per Share (EPS). EPS is a key component of a company for shareholders, as stock price is heavily dependent on it. There is also a strong correlation between EPS and how well a company performs, particularly when employees benefit from it.
Essentially, if employees receive higher incentives based on a higher EPS number, then they perform better and produce more. If the EPS is not part of an incentive package then the opposite is true. However, there is a fear in the marketplace that companies can use an inflated EPS number in order to gain an advantage in the marketplace. There could be an instance where the leadership of a company could inflate the EPS in order to entice buyers to purchase the stock, creating that stock price to go much higher than the actual valuation of the company. This practice could also create legal problems for the company, but ultimately rip money from the hands of the shareholders.
Jeremy Goldstein suggests that company’s create a way to incentivize the employees while also having a stop gap measure in place that will hold the leadership of the company accountable for any unsavory actions on their part. This will allow for there to be a fair EPS reported that will reflect the efforts of the employees as well as provide an accurate measuring stick of company performance for investors.
Jeremy Goldstein has been practicing corporate and employment law in New York City since 1999. That year, he graduated from the New York University School of Law and began working as an associate at Shearman and Sterling. He receive his Bachelor’s degree from Cornell University in 1995 and his Master’s degree from the University of Chicago in 1996. In 2000, he joined Wachtell, Liptin, Rosen, & Kratz as a corporate lawyer specializing in employment law, where he stayed until 2014. Since leaving that firm, he has opened his own firm, Jeremy Goldstein & Associates, where he continues to help corporations comply with employment law. Jeremy is an avid volunteer in NYC, serving as the Director of the Fountain House for the past decade.