Many factors contribute to ensuring the economic environment of business organizations is stable. If one factor is over emphasized and other ignored, the result is endless legal battles in which the employees and the shareholders suffer. Jeremy Goldstein, an attorney at Jeremy L. Goldstein & Associates, has dealt with corporate suits long enough to know where the problem usually begins. He advices business organizations to balance between the strategies they use to achieve long term gaols and those they use to attain short term goals. Learn more: http://jlgassociates.com/
Most companies today use the EPS, Earnings per Share, to raise money and give incentives to employees. It’s a short term strategy that helps the company make profit. Knowing a company’s EPS is what can make an investor buy or sell his shares. Using also EPS affords the company the opportunity to pay more per employee. As a result, companies have a tendency of over emphasising on their EPS to attract more investors and have their employees paid well.
The main problem with concentrating on EPS is that it is short term, it does not focus on the company’s long term goals; just making profit. Since performance is determined by whether people buy the shares or not, it makes the company’s economic environment very unstable. This ultimately means that the company has no structure through which the money is reinvested or used to do business.
Opposers of EPS also say that the fact that the discussion making is left solely to the CEO, it grants them too much power. When a company uses EPS, it is the CEO who determines whether the company is meeting the metrics or not. This hinders the shareholders from having accurate results of the company’s profitability. As a result, they feel out of control of their investment.
In as much as EPS has several sighted disadvantages, it also has his strengths. Jeremy Goldstein therefore advices companies to balance their short term strategies with their long term. Concerning the disadvantages of EPS, he says companies should find a way of holding the executives responsible for the decisions they make and the EPS should be made to match up with the long term goals the company had in place. This will see the companies that use EPS be more stable and make money in the long term.
Jeremy Goldstein is a partner at Jeremy L. Goldstein & Associates LLC. Before founding his own firm, Jeremy worked as a partner at Wachtell, Lipton, Rosen & Katz. He has been privileged to work in high profile clients like United Technologies. He played an integral role in seeing them acquire Goodrich