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Disadvantages Of Restricted StocksAnother disadvantage is that if the stock is tied up to the performance of the company, it will be subject to any changes in the accounting procedures. For example, the financial scandal generated by Enron, forced the US Government to change the law. This generated higher operating costs inside corporations. As a consequence, the profit margins of companies across America have been compromised.
On the other hand, forward split stock is used for reducing the value of the share. This is done through the emission of more stock, ergo, price of the original one is reduced. This strategy is quite useful for a company that wants to make it's share more marketable. As it can be seen, theses financial tools aren't alternatives or options vs. restricted stock. Accounting for restricted stock has made life easier to many corporations. They have found in this financial tool a means to control any unethical behavior that could arise among it's executives. Specially if we consider cases like Enron or WorldCom. For this and the other motives mentioned above, it is no surprise then that you will find restricted stock options in your future compensation. |
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