Long-term incentive plan

Transcription

Hi, I'm Ed Rataj, Managing Director of Compensation Consulting for CBIZ Human Capital Services. Today we're going to talk about the top four mistakes that companies make when developing long term incentive plans for their Executives. The first mistake that they make is focusing exclusively on external market data to drive the design of the plans. Well, market competitiveness is certainly a critical consideration. It shouldn't be the only consideration. It's important to understand, are you paying above market, right in line with market, or potentially below market, but there are certainly other considerations that should be taken into account. The second mistake that organizations make is that they focus exclusively on the corporate structure of issues associated with long term incentive plan designs. The third mistake that companies make is not giving sufficient consideration to the different types of vehicles available for long term incentives. Some owners are very willing to share ownership in the company in the form of long term incentives and equity grants. Others are looking more for a cash value. There are a number of pros and cons associated with each plan design, each design feature, such as does the company need to do a valuation? Is there equity; is there voting equity that's being granted, and the like? These are all important considerations. The fourth mistake, and I've seen this happen a number of times with my clients, is not getting legal involved early enough in the decision making process. Legal can ensure that the appropriate documents are signed, the appropriate documents are drafted. And they take into account all of the design features that are important to the organization. And frankly, I've seen clients that got to year end and didn't meet their deadlines because they didn't have somebody there guiding them through the process. If you avoid these four design issues, you should have a successful long term incentive plan design implementation. For more information, feel free to contact me directly. Thank you.