Two things serve as an indication that a company is profitable; the incentives it can afford to give its employees and the dividend it gives per share, otherwise known as EPS. However, this does not guarantee that a company is stable. What guarantees a company’s stability is its long term goals; like its investments. A company that has good long term goals will still be able to make money whether it is doing well in the market or not. Since the bottom line of a company is to make profit, many companies list EPS as part of their payment structure. This helps them attract investors.
What makes investors either buy or sell a company’s stock is the amount of profit per share he or she will get from it. Therefore, if the EPS of a company is attractive, more investors will buy. As a result, some companies may be tempted to skew information given to the public to lead the buyers to think that the profits they stand to gain from the company is substantial. This is not just misleading, it is criminal.
Opponents of EPS also sight that a company that emphasises on EPS gives too much power to the executives. Considering the fact that it is the CEO only who can say whether the company is making profit or not, there is a possibility that the CEO might present false info to attract investors. Since EPS is dependent of the buying activity of investors, it is not stable. The company is only profitable as long as its EPS attracts buyers in the stock market.
Jeremy Goldstein the founding partner of Jeremy L. Goldstein & Associates, LLC, understands the dilemma companies face in choosing strategies suitable for the company; should they emphasise on long term goals or short term? He has dealt with numerous law suits to know where corporate problems begin and the best way to go to achieve a profitable solution. Concerning the dilemma of choosing between incentive based strategies and long term strategy, he recommends a compromise between the two.
Jeremy Goldstein says that if companies come up with a way of holding executives accountable for their decisions, half the problem will be solved. The other half will be taken care of when companies ensure that their incentive based strategies measure up to long term goals. Learn more: http://officialjeremygoldstein.com/
Jeremy Goldstein has worked for several companies during his law career. His excellent performance in the cases he has handled has seen hi be mentioned among the top 500 in the legal 500 and America’s leading lawyers in business by Chambers USA Guide. He has also published several journals giving public opinion on legal matters.