As Netflix shares plunged last week, according to Bloomberg, the Company is expected to lose valuable employees in the coming months. Stock-based compensation – especially given the meteoric rise of share prices over the last decade, has been key to attracting and retaining top talent.
With the erasure of value of many employees’ options, employees who were sitting on a substantial nest egg now find themselves sitting on a fraction of what they did less than two weeks ago. And given Netflix’s own expected future performance, there is very little confidence of a rebound in its share prices any time soon. Moreover, as overall equity prices continue to decline on account of inflation and interest rates as many pundits predict, this may be a good time to reevaluate compensation structures.
Executives, especially those that have leverage in structuring their compensation packages should take note. More often than not, a typical compensation package tapers the cash compensation component in lieu of increased stock options over the course of their tenure with the company. The upside of course being the benefit of rising share prices that ultimately entices such offsets. But in an uncertain market, such as the one we are currently entering, a more balanced package might be the way to go.
If you are an executive currently negotiating your compensation package, give us a call. The attorneys at Outside Legal Counsel LLP can help come up with creative structures in order to hedge against a downturn in the market.
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