<aside> <img src="/icons/arrow-right_orange.svg" alt="/icons/arrow-right_orange.svg" width="40px" /> From the Pay Your Top People

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Problem: I need them to think long-term like an owner. I need to bring in a new CEO, replace myself with someone who will act like an owner, etc.

<aside> <img src="/icons/checkmark-line_orange.svg" alt="/icons/checkmark-line_orange.svg" width="40px" /> Solutions:

Example:

The current CEO/owner wants to bring in a new CEO who has more growth experience in the industry but wants to keep all the voting rights.

With the current state of the company, the current CEO/owner wants to encourage the new leadership to be invested in the longterm growth and performance of the company.

The solution: Phantom Stock or Equity

Phantom Stock: This enables the current CEO/owner to incentivize the new CEO to think strategically while maintaining all voting rights. The senior employee will receive “units” in a plan that track to the value of the company as determined by the Board. At a liquidity event, the employee’s units are valued based on the sale price and payment is made according to terms of the plan. Phantom stock can have “vesting”, required ongoing employment, and other more complicated provisions.

Equity: The senior employee gets stock in the company. This can be in the form of Options or actual shares, subject to vesting or other restrictions based on the plan you design. This can create more beneficial tax outcomes to the employee depending on structure and also comes with stock ownership rights.

<aside> <img src="/icons/arrow-right_orange.svg" alt="/icons/arrow-right_orange.svg" width="40px" /> Read Next:

Four Dimensions of Pay

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About Matt

Matt Schnuck is a serial entrepreneur, investor, advisor and content creator focused on EQ, entrepreneurship and building modern holding companies.

<aside> <img src="/icons/globe_orange.svg" alt="/icons/globe_orange.svg" width="40px" /> www.mattschnuck.com

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