<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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<aside> <img src="/icons/checkmark-line_orange.svg" alt="/icons/checkmark-line_orange.svg" width="40px" /> Solutions:
The company started 4 years ago with a goal to revolutionize the marketing industry. And they did for a few years.
In the past two years, the market for those services has evolved and has become saturated with competitors that can offer similar services for less.
The board wants to promote a rising star to help lead the new direction of the company.
The simple solution: The profit sharing plan
To motivate that new leader, the board will implement a profit share plan.
Profits from the successful turnaround will be shared with the new leader.
The sophisticated solution: Phantom Stock Plan
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.
The more sophisticated solution: 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.